Welcome to the Bankruptcy Blogger!

October 19, 2011 jwrobel

Joseph Wrobel

Welcome to the Bankruptcy Blogger. I am a Chicago bankruptcy attorney practicing for more than 35 years.  Through the Bankruptcy Blogger, I will share with you the knowledge that I have accumulated over the years in order to help you determine if a bankruptcy is something that you need. Notice that I did not use the word “want”; no one EVER wants to file a bankruptcy. Clients often tell me that they can’t believe they are sitting in my office, contemplating bankruptcy. Well, if there is one thing that we all know it is that one never knows what comes next in life.

So what is bankruptcy actually?  It is a federal court procedure that allows consumers (and businesses) to either “get of rid” of debts through a Chapter 7 or repay them through a Chapter 13 or Chapter 11.  Chapter 11 is an extremely complicated (and expensive) process and although on occasion used by consumers, it is almost always filed by businesses.

So how do you know if you “need” to file? A simple answer is that if you are unable to handle the bills that you have, bankruptcy may be the a solution to your financial problems and is something that you should explore. You should learn all you can about the process, even before you see an attorney. The law is complicated, there is lots and lots of paper work, a good attorney will guide you through the process and make it painless, but it will certainly help you and your lawyer to learn all you can about the process. Because I appreciate you being here, I promise to help you learn all you can. Let me earn your return visit by making good on this promise.

Helping You Understand Bankruptcy Leave a comment

Flash News Report – Foreclosure Rights Survive Bankruptcy – Full Story Below

December 31, 2011 jwrobel

In 2010, we filed a Chapter 7 bankruptcy for a client.  Among other assets, she owned a condominium that was burdened with a first and a second mortgage. She could no longer afford to pay both mortgage payments and the condominium assessments. As have many properties around he country, her condo had dropped a lot in value; it was not worth her while to keep it.

Her Chapter 7 went smoothly and she received her discharge.

I recently received the following email from this same client:

“Mr. Joseph Wrobel:

I received a summons in the mail on Dec. 23rd. I faxed it to your office so you could see exactly what it says. Is this just a formality or am I in more financial trouble?I assume since it’s a summons I do have to attend the court hearing on Feb 9. It says to contact the lender but I do not want the property so is there anything I should do now? This was filed by the second mortgage company. What are they going to do in court am I really going to have to pay the $198.00 filing fee and is there anything else they will make me pay. Thank you.”

This is a common scenario:  as part of the Chapter 7 process, many clients in our current economy
have decided that it is not worthwhile to retain the real estate that they own. They use the discharge that comes with the Chapter 7 to eliminate their legal obligation to pay their mortgages.

Often, at the time the Chapter 7 petition is filed, the mortgage company has not yet filed the foreclosure complaint. Clients are then surprised ( and often nervous ) when they later receive a summons to appear in foreclosure court. How can this happen? Understand that the Chapter 7 eliminates the ability of the mortgage lender to collect the debt. The debt was created by the “note” that was signed when the loan was taken out. However, the Chapter 7 does eliminate the rights that the mortgage lender has to foreclose. Those rights were created by the mortgage which is a lien against the property. Those rights survive the Chapter 7.

So how did I answer my client’s email?

You need not do anything. You need pay a filing fee, file an appearance or appear in court; you can ignore the whole thing. The foreclosure will run its course through the courts. Your bankruptcy protects you.

Don’t worry about it.


Happy New Year.

Bankruptcy And Your Home, Helping You Understand Bankruptcy Leave a comment

Why Do I Have To List All My Credit Cards?

December 23, 2011 jwrobel

“I went to this lawyer the other day and he told me that I can’t pick and choose who goes into my bk. Hey, what gives here? I gotta keep one of my Visas.”

Sorry, but you can’t. A petition in bankruptcy requires the complete disclosure of all financial information, which includes a complete listing of all your debts. What happens if you don’t? Your petition is signed under oath; you do not want to commit perjury by signing a false oath.

You might be able to keep one or more credit cards. First of all, you need to be able to afford to pay them. Secondly, the interest rate need to be sensible. How does one go about doing this? Wait a few weeks after your bankruptcy petition is filed. Contact the creditor. Find out if they will allow you to continue to charge on the credit card if you agree to pay them. If so, you still have a useable credit card. You probably have a better chance retaining a department store card. If the creditor says they will not, you have only wasted a little time on the telephone.

In general, retaining the use of a credit card is not the best idea since for many but not all clients, the credit cards caused the financial problems leading to bankruptcy.

Bankruptcy Basics - Chapter 7, Helping You Understand Bankruptcy Leave a comment

But there is only $5.00 in my checking account

December 3, 2011 jwrobel
Something that I see routinely:  On our forms that we ask our clients to complete providing us with information about their finances so that we can provide proper advice to them, there is a section to list bank accounts. Every so often, a prospective client leaves this section completely blank. Although some clients do not have any checking or savings accounts, it is not a very common situation.  So I ask the client: “You have no checking and no savings accounts at all, even if there is nothing in the accounts?”  I am answered: “Oh yes, I do have a checking account at ‘so-and’so’ bank, but there is just five dollars in the account, so I didn’t list it since I didn’t think it mattered.”
BUT IT DOES MATTER: all bank accounts need to be listed, regardless of how little is in the account. The Bankruptcy Code requires complete disclosure of all assets. Anything less and you are risking adverse consequences against you. Your lawyer cannot properly represent you unless you have provided your lawyer with everything requested concerning your financial situation.

Bankruptcy Odds and Ends, Helping You Understand Bankruptcy Leave a comment

Ain’t No Reason To Reaffirm Your Mortgage, But There Certainly Is For Your Automobile

November 27, 2011 jwrobel

Let’s begin by defining reaffirmation:  A reaffirmation is an agreement made between a debtor and his/her creditor to re-pay a debt, whether it is the entire debt or part of the debt, that would be discharged in a Chapter 7 Bankruptcy.

Why would you agree to pay a creditor whose debt can be discharged? The answer requires understanding the difference between an unsecured and a secured debt.  An unsecured debt is simply a  promise to pay, whether orally or in writing. There is no collateral to secure the debt and the discharge that you receive when your Chapter 7 is completed, discharges the promise that you made to the creditor.

A secured debt has the same promise to repay as an unsecured debt but there is also collateral for the promise. When a creditor has collateral for its debt, it means that what you have “pledged” as collateral can be taken by the creditor if you do not pay the debt. An example is a loan to finance the purchase of an automobile. The lender has a lien against the title to the vehicle. The lien rights allow the lender to repossess the vehicle if payment is not made.

What happens to a secured debt when you file a Chapter 7 Bankruptcy? Let’s take an automobile loan. A I said, the completion of the Chapter 7 Bankruptcy discharges your personal obligation, but the lien rights SURVIVE the bankruptcy. This means that you have to make a decision to either return your auto or keep it and pay for it. If you return or surrender your vehicle, the Chapter 7 Bankruptcy discharge protects from ever owing any money.

There are two ways to pay for your auto. The first is to pay for it by redeeming the vehicle, making a one-time lump-sum payment equal to the value of the vehicle, which is a very uncommon situation. The second is to sign a reaffirmation agreement, agreeing to make the regular monthly payments until the vehicle is paid, after which you will receive the title. Since the lien rights survive the bankruptcy, you will not be able to keep your automobile unless you pay for it.

What about your mortgage? Many clients ask me about reaffirming their mortgage. They think that it is required and is something that they should do. My response is that there is rarely ever a reason to reaffirm a mortgage. Why? The mortgage lender will not foreclose as long as you make the mortgage payments. It may be a hassle to deal with the lender without the reaffirmation; your credit report may not reflect that you are making mortgage payments; but the advantage of never having to worry about being personally responsible for the debt far outweighs any possible negatives. In our current times, when so many homeowners are “upside-down” on their home, and so many homeowners are considering whether it makes sense for them to keep their home ( Will there ever be equity in my house? How long will it take?), knowing that any time after your bankruptcy is completed you decide not to continue mortgage payments, clients have told me that it is a wonderful feeling knowing they never have to worry about “getting stuck” for the mortgage payments.

Bankruptcy Beyond The Basics Leave a comment

How In the World Did We Get Here? – The Making of Our Present Bankruptcy Law

November 10, 2011 jwrobel

In the late 1990′s and into the early 2000′s, the finance industry ( Visa, MasterCard, the major National Banks, the major automotive loan finance companies, the mortgage industry) complained to Congress about Americans who were filing bankruptcy. Why were they complaining?

“We are losing money”,  whined the companies-that-charge-you-outrageous-interest-on-your-credit-cards.  “You people are getting away with murder by filing bankruptcy when you really don’t need to”.  These “needless” bankruptcies supposedly were bad for the bottom line of the finance industry.

Indeed!!! I have been practicing for more than 37 years and I have NEVER had a client file a bankruptcy without there being an actual need to do so.

” Plus, these bankruptcy filers – they are all liars. They are hiding gobs of money and assets that they never tell anyone about.”

“And….. and….. and ….. you know what else?” said the whiny industry. ” It is way too easy to file a bankrutpcy. We need to make it harder”.

And so they did.

Millions of dollars were spent lobbying Congress and after years of lobbying efforts in Washington, a new bankruptcy law was voted into being by Congress. Welcome to BAPCPA, the Bankruptcy Abuse Prevention and Consumer Protection Act, enacted in April, 2005 and Effective October 17, 2005.  (See what I mean? Congress used the word “abuse prevention”. ) As a bankruptcy attorney, my life became much more complicated once the new law went into effect. In fact, I know quite a number of attorneys who stopped handling bankruptcy cases once the new law went into effect. They found the learning curve too steep. What our Senators and Representatives did with the enactment of the current law which governs the bankruptcy process was to create a paper monster. I wish I owned the trees from which the paper is created for all the documents that are needed in order to properly prepare a bankruptcy petition.

Stay tuned. There is more to come.

Bankruptcy Odds and Ends, Helping You Understand Bankruptcy Leave a comment

Credit Counseling – Why Do I Have To Do It?

November 3, 2011 jwrobel

Many clients ask me: Why do I have to take a credit counseling class?  The simple answer is: the Bankruptcy Code requires it.

You may have paid your lawyer all of the fees required, you may have provided your lawyer with all the information necessary for a petition to be properly prepared, your petition may have been prepared, you may have signed it….but if you have not taken the pre-filing credit counseling session and provided a certificate of completion to your attorney, your petition cannot be filed.  Note that the bankruptcy petition cannot be filed the same day as the date of the certificate; the filing of the petition must be at least one day later than the date of the certificate

Many clients are fearful of the credit counseling: What will they ask? I don’t know what to say? What if I don’t pass? How much does it cost?

The credit counseling itself is extremely simple;  you cannot fail. You will be asked about income and living expenses; estimated answers are fine. The counseling can be done on the Internet, by telephone or in person. Make certain that you use an approved agency. There is a HUGE list of approved agencies at the following link:

http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm

The credit counseling is not expensive at all. There are some that are extremely inexpensive. Your attorney can provide with the “cheap” ones; our office does.

Keep in mind that in order to receive your Court-Ordered Discharge, which finalizes your bankruptcy, there is a second class that you must take called a Financial Management Class. Again, this can be done on the Internet, by telephone or in person. If you are filing a Chapter 13 Bankruptcy in the Northern District of Illinois, our Chapter 13 Trustees offer the counseling free of charge AND…my clients told me that they actual learning something about budgeting and managing money.

Bankruptcy Odds and Ends, Helping You Understand Bankruptcy Leave a comment

Overview of Consumer Bankruptcy – Part II of II

October 27, 2011 jwrobel

What is Chapter 13?

Chapter 13 is a  payment plan procedure to pay back your debts. The petition and plan are file with the bankruptcy court so it is one of the two bankruptcies available to consumers.  Just about all of your debts are consolidated and instead of paying them individually, you make one monthly payment to the Chapter 13 Trustee for the county in which you live. The Trustee will use the monthly payment that you send in to repay your creditors over a period of time from three to five years.

Why does someone file Chapter 13 instead of Chapter 7?

There are a number of different reasons. Here are a few of them:

1) You filed a Chapter 7 less than eight years ago so you can’t file another one now

2) You own something worth too much money and it would be taken from you by a Chapter 7 Trustee and sold in order to pay your creditors from the sale

3) You cannot pass the Median Income/Means Test

4) You have one or more debts that you need to pay, such as a past due IRS debt

5) You want prevent a foreclosure from being filed or stop a foreclosure that has started. The monthly Chapter 13 plan payments will repay, over a period of time, the mortgage payments that have fallen past due.

As with a Chapter 7, the process involves the gathering of  information and documents in order to prepare a petition that is filed with the bankruptcy court. There is a meeting scheduled a few weeks after filing with the Chapter 13 Trustee’s office, followed a few weeks later by a court date for the matter to be recommended to the Judge for confirmation (approval) by the Chapter 13 Trustee. Upon completion of the plan, as with a Chapter 7, you receive an Order of Discharge signed by the Judge and you are now debt free, other than mortgages that you might have and possibly auto loans.

How much is the monthly payment? How many years will the plan run? Will creditors be paid in full or a percentage of what is owed them.

Determining a proper Chapter 13 plan ( proper meaning based upon the bankruptcy law) contains too many variable for this blog. Chapter 13 is almost much more complicated than a Chapter 7. Make sure that your attorney has sufficient experience and knowledge in the handling of Chapter 13 bankruptcies.

Bankruptcy Basics - Chapter 13 Leave a comment

Overview of Consumer Bankruptcy – Part I of II

October 24, 2011 jwrobel

What is Chapter 7? Chapter 7 is the most common type of bankruptcy.

Why would you file a Chapter 7?  A Chapter 7 bankruptcy is filed in order to eliminate your obligation to pay your creditors: credit cards, pay-day loans, medical bills of all kinds, balances still due on repossessed automobile loans or foreclosed mortgages, etc., etc.

What is involved?

A petition needs to be prepared and filed with the Clerk of the U.S. Bankruptcy Court. Your lawyer will prepare the petition. The petition contains a great deal of  financial information about you, including but not limited to: a list of creditors, a list of assets, a budget, answers to a series of financial questions and the Median Income Test. Preparing the petition requires the accumulation of many documents, among other things: copies of bills, collection letters, loan statements, law suits filed against you, tax returns pay stubs, etc., etc. As soon as your petition is filed, you are now protected against your creditors. Telephone calls must stop, nasty collection letters must stop, lawsuits cannot be started or continued, wage garnishments cannot be started or continued.

Four to eight weeks after filing, you will have a meeting with the bankruptcy trustee that is assigned to your case. This is not a court appearance; it is simply a meeting and is generally much easier than you can possibly imagine and quite painless. The purpose of the meeting is to verify that you will be allowed to keep those things that you own that you want to keep, whether bank accounts, vehicles, real estate, furniture, etc. Very few people who file Chapter 7 have anything taken from them. (A reason to file the other type of consumer bankruptcy,  Chapter 13,  is to keep an asset that is worth too much money. If your uncle gave you a brand new automobile six months ago, and you came to see me to file a Chapter 7 to get rid of $50,000.00 worth of credit card debt and medical bills, I would tell you that you need to file a Chapter 13 and repay some of your debt to keep that car; that if you filed a Chapter 7, your car would be sold by the trustee.)

What happens after the meeting?

Just about 4 months after your petition has been filed,  you will receive a document  called Order of Discharge.  The Order of Discharge is the document that officially eliminates, forever, your legal obligation to pay the creditors that you owed at the time you filed your Chapter 7 petition.  Your case will not take 2 months, nor will it take 8 months. Honest people that qualify for Chapter 7 receive a discharge. Chapter 7 bankruptcy is the only legal process that I know of where you know how long it will take and what will happen.

Bankruptcy Basics - Chapter 7 Leave a comment