Few things are more stressful than serious financial problems, which is why we highly recommend that you reach out to skilled Chicago bankruptcy attorneys to help you understand your rights and options. Consistent with our client-centered philosophy, at FactorLaw we offer initial consultations without charge and without any ongoing commitment so that our highly skilled team of attorneys can get to know you and help you determine a sensible course of action.
Individuals and families that retain us usually done all they can on their own to resolve their financial problems, but find that they need help. They are falling behind on payments and the problem is compounding month after month. They may have been served with a lawsuit, or are facing foreclosure. Often they are dealing with a divorce, layoff or major illness that has drained their resources. Whether you are experiencing one or more of these financial hardships, we are here to help.
Chapter 7 is the “fresh start” provision that allows you to discharge (“wipe out” or “erase”) most of your unsecured debts and start over. Some debts, like student loans, certain taxes and domestic support obligations, cannot be wiped out.
In exchange for the fresh start from creditors, however, you have to surrender to a “bankruptcy trustee” all of your property that has value to creditors. You are allowed to keep a certain amount of “exempt” property. Any property, including a house, that is subject to a mortgage or a lien often cannot be sold by a bankruptcy trustee because there is no equity in the property, particularly after considering the exemptions that apply to that property.
If, after taking your exemptions, there is no property with equity value that can be liquidated to pay creditors, then the bankruptcy trustee prepares what is called a “no asset” report. In that circumstance, a person is able to retain their property. This includes a house, although you will still need to reach an acceptable agreement with the mortgage lender outside of bankruptcy.
Chapter 7 cases can take between 3-4 months or longer, depending upon how quickly a Chapter 7 candidate is able to prepare the necessary paperwork, whether the candidate has assets that a “trustee” can sell or whether the trustee files a “no asset” report, and whether creditors challenge the right to a discharge.
At FactorLaw, the Chapter 7 process usually commences after a consultation (usually at no charge) with one of our attorneys either in Northbrook, Downtown Chicago, or on the phone. The initial consultation allows our Chicago bankruptcy attorneys to discuss your situation so that we can determine if you qualify for Chapter 7, and if it is the best option for your situation. There’s no commitment, just a chance to learn about your options.
If your family income exceeds a certain amount, you may not qualify for the Chapter 7 form of bankruptcy, in which case you will need to consider Chapter 13. Whether you qualify or not is called the “means test.” The “means test” analyzes whether you and your family have the “means” to repay creditors under Chapter 13. Generally speaking, a family of 4 living in Cook County that earns less than $70,000 a year will qualify for Chapter 7. We are skilled in determining whether families qualify under the means test or not.
After the initial consultation, we will then send you an “engagement agreement,” which is a letter that explains the terms and conditions of the attorney-client relationship between you and FactorLaw, if you decide to hire us to represent you. The engagement agreement also will explain the costs and expenses related to our representation.
Preparing the Bankruptcy Schedules
Once the engagement agreement has been signed and any necessary fees and expenses have been paid (or payment arrangements have been reached), we then work with you to prepare the documents that start your bankruptcy case when filed. You will then complete either a written questionnaire or a web-based questionnaire that captures crucial information about your assets and liabilities. Such information is used to prepare the “Bankruptcy Schedules” that are filed with the court.
Most of our work with you will consist of preparing the Bankruptcy Schedules and making sure the schedules accurately and comprehensively reflect your assets and liabilities and reflect the “exemptions” that apply. We will obtain from you, or obtain with your permission, a recent credit report to identify credit card and other obligations, as well as recent tax returns. Depending upon the complexity of your situation and your ability to send complete information, preparing the Bankruptcy Schedules can take anywhere from a few days to a few weeks, or longer. We will prepare your schedules, then send them to you to review. We typically review each item on the schedules with you either in person or on the phone to make sure that you have properly listed all of your assets and liabilities and have not forgotten anything.
During the process of preparing the Bankruptcy Schedules, we also will enroll you and your spouse (in a joint case), in a “credit counseling course.” You can complete the credit counseling course either over the internet or the phone. The course usually lasts about an hour and a half and is designed to educate you about the bankruptcy process. You cannot file for bankruptcy until you have completed the credit counseling course and have obtained from the course provider a certificate of completion.
The Credit Counseling Requirement
Once you have completed the credit counseling course and we are confident that the Bankruptcy Schedules are complete and accurate, we then file the Bankruptcy Schedules with the Bankruptcy Court. We do this through an internet-based case filing system. Almost immediately after the Bankruptcy Schedules have been filed with the Clerk of the Court, we receive a notice that contains the bankruptcy case number and send that to you for your files. You are now protected from creditors by the Bankruptcy Code and the automatic stay.
The automatic stay is a law that automatically stops creditors from contacting you to collect their debt and also puts an immediate stop to garnishments, foreclosures and other legal action to collect a debt or recover your property. If a creditor violates the automatic stay they can be ordered to pay you any damages that you have suffered as a result of their failure to stop collection efforts.
The Section 341 Meeting
Within a day or two after the Bankruptcy Schedules have been filed, the Bankruptcy Court will notify us of the date and time for your meeting of creditors under Section 341 of the Bankruptcy Code. This is often referred to as the “341 Meeting.” Usually the 341 Meeting is scheduled about 30 days after the Bankruptcy Schedules have been filed.
Prior to the 341 Meeting we will ask you to send us (if we do not already have them) a copy of your tax return for the prior 2 years, as well as copies of pay stubs for 2 months before you filed. We also will remind you of the time, date and location of the 341 Meeting, and that you must bring to the meeting a copy of your social security card and a picture identification. If you live in Cook County, the 341 Meeting will be on the 8th floor of the Dirksen Federal Courthouse at 219 S. Dearborn, Chicago. If you live in another county, the meeting will be held in a courthouse located within that county.
Although many people are nervous about the 341 Meeting, there is nothing to be concerned about. In most cases the 341 Meeting is nothing other than a short (5 to 10 minute) interview with a Bankruptcy Trustee whose main goal is to determine if you have any assets that can be sold to repay some or all of the amount owed to your creditors. The Bankruptcy Trustee will ask you questions about the information in the Bankruptcy Schedules and will confirm with you that the information in the Bankruptcy Schedules is correct. In our experience, most people leave the “341 Meeting” feeling relieved and wondering why they were so nervous in the first place.
The Debtor Education Course Requirement
After the 341 Meeting, we will enroll you and your spouse (for joint cases) in a “Debtor Education Course.” Like “Credit Counseling,” this course can be taken over the internet or on the telephone. The Debtor Education Course will provide you with additional information about life after bankruptcy. The course must be taken in order for you to emerge from bankruptcy with a discharge.
In most cases, we will receive a notice from the Bankruptcy Court about 60 days after the 341 Meeting advising us that you have received a bankruptcy discharge. If the Trustee has filed a “no asset report” we also will receive a notice advising that the bankruptcy case has been closed. Congratulations! You are now officially out of bankruptcy and off to a “fresh start.”
It is important to understand, however, that a discharge under Chapter 7 does not erase all debts. Certain debts, such as student loans, most tax obligations and divorce and child support obligations, are not discharged. This means you will remain liable for the debt even after bankruptcy. Creditors also can try to have a debt declared non-dischargeable by proving (usually after a trial) that the obligation was fraudulently incurred, or was the result of willful and malicious conduct.
If you’d like to schedule a free initial consultation to find out if Chapter 7 is right for you, please contact us or call (312) 878-6976 today.
If we determine during our initial consultation that you and your family do not qualify for Chapter 7 or that Chapter 13 is a better option, we will then help guide you through that process as well. To qualify for Chapter 13 (as of 2013), you will need a regular income and your secured debts cannot exceed approximately $1,149,525 and unsecured debts cannot exceed approximately $383,175. If you owe more than these amounts, you might have to file for Chapter 11 relief.
Starting the Chapter 13 Case
As with a Chapter 7, if you decide to hire us for a Chapter 13 case, we will start the process by sending you an “engagement agreement.” The Chapter 13 engagement agreement explains the costs and expenses related to our representation. The fee has been set by the Bankruptcy Court in Chicago and in most cases you will not owe any additional amounts, even though, as explained below, a Chapter 13 case generally lasts for three to five years.
The Chapter 13 process also is similar to Chapter 7 in that most of our work consists of preparing the Bankruptcy Schedules and making sure the Schedules accurately and comprehensively reflect your assets and liabilities and reflect the “exemptions” that apply.
The Chapter 13 Plan
However, in addition to the Bankruptcy Schedules, in a Chapter 13 Case we also will work with you to prepare the Chapter 13 Plan. The Chapter 13 Plan explains how much you will repay to your various creditors each month over a five year period. The Bankruptcy Court must approve the Chapter 13 Plan. Creditors, as well as the Chapter 13 Trustee, can object to the Plan if they believe it does not meet certain legal requirements.
We work with you to develop a Chapter 13 Plan that meets your particular needs and that also passes legal muster. If any of your creditors, or the Chapter 13 Trustee, challenge the Plan, they usually argue that the amount paid under the Plan is not sufficient. Generally, the amount you will have to pay each month is determined by subtracting your gross income each month from your necessary living expenses. The difference between your gross income and necessary living expenses is defined as your “projected disposable income” or “PDI.” Disputes may arise based upon whether a monthly expense is a “necessary living expense” or based upon whether amounts you receive each month are properly considered as part of your PDI.
If your Chapter 13 Plan does not pay your PDI each month to creditors, it will not be approved over the objection of creditors. The Plan also is subject to challenge if it pays creditors less than what they would receive if all of your property was liquidated in a Chapter 7. In other words, if you own property that has a lot of equity in it, then the Chapter 13 plan has to pay creditors an amount that is at least equal to the amount of equity in your property. This can pose a challenge if your PDI is too low and does not permit you to make plan payments that are equal to the value of equity in your property.
In a Chapter 13 bankruptcy, again, your Section 341 meeting of creditors will be scheduled for a date and time four to six weeks after the date of your case filing. After the meeting of creditors your case will continue for three to five years, depending on the terms of your repayment plan.
We have extensive experience representing individuals and families in Chapter 13. We know how to create repayment plans that get approved by the court and work for your budget.
If you’d like to schedule a free initial consultation to find out if Chapter 13 is right for you, please contact us or call (312) 878-6976 today.
1. Will I lose my home/car if I file under Chapter 7?
Most people are able to keep their homes and vehicles in Chapter 7 as long as they remain current with the payments. If you have fallen behind on your mortgage or car payments, Chapter 13 may be a better option for you.
2. What is the fee for the initial consultation?
In most cases, the initial consultation is free and does not commit you to hire us. During the initial consultation we prefer to sit down with you face to face to discuss your financial situation and future goals. These meetings typically last 30 – 60 minutes. We have convenient locations in Chicago and Northbrook to fit your needs. If you prefer, we can schedule a phone consultation for your convenience.
3. What should I bring with me to the initial consultation?
Below is a list of documents that you would bring to the initial consultation in “ideal” circumstances. That said, it is not mandatory for you to bring all of these documents, just do the best you can:
4. What is credit counseling and why do I have to do it?
In 2005, Congress changed the Bankruptcy Code to require all debtors to complete a mandatory credit counseling course before filing for bankruptcy relief. The course itself usually takes about an hour and a half and is presented either through the Internet or the telephone. Once you have completed the credit counseling course, you will receive a certificate of completion. Please send a copy of this certificate to our office for filing with the court. Please keep in mind that there is a second course that must be completed after you file your case, called the Debtor Education course. Again, after your case has been filed and you have completed the debtor education course you will receive a certificate of completion. You must send a copy of this certificate to our office for filing with the court.
5. When will these creditors stop calling me?!?
Once your bankruptcy case is filed, the automatic stay is imposed by federal law and prevents creditors from taking any further actions to collect from you including: calling, sending bills, suing, garnishing your wages, etc. If a creditor does not immediately cease its actions against you, or tries to contact you directly about paying a debt, after you’ve filed your case, you should contact us immediately and we will bring the matter to the attention of the Bankruptcy Court. Bankruptcy Courts sometimes sanction creditors who violate the automatic stay.
6. How do my creditors get notified of my case?
Immediately following your filing, the Bankruptcy Court sends out by mail a Notice of Filing to you as well as the Notice of Stay to your creditors. If you are contacted by creditors following your bankruptcy filing, but before they receive the notice of stay, you can tell your creditors that you have filed and give them the Bankruptcy Court docket number.