FAQ's. Common Concerns about Personal Injury, Bankruptcy & Real Estate matters.
Going through something as difficult as a major legal event can leave you filled with questions about the past, present, and what to expect in the future. Get answers to some of the top questions I receive about Illinois personal injury, real estate and bankruptcy matters to help put your mind at ease. Check back often for even more answers to your legal questions. Better yet, give us a call to see how we can help.
- Page 2
I am moving or just moved. Where do I have to file my bankruptcy?
Your bankruptcy petition will be filed in the district bankruptcy court where you live. But, if you recently moved- you will have to have lived in the court’s jurisdiction for the last 180 days (roughly six months). If you are a business, then where you have your principal place of business, where the business is organized or where there is a pending case of an affiliate or your partner. 28 USC 362.
Will I lose my retirement if I file for bankruptcy?
Your Pension, IRA, and 401k are protected in bankruptcy in the State of Illinois. When the bankruptcy laws were written, lawmakers wanted to make sure to protect people's retirment plans. However, they must be properly 'exempted' on Schedule C of your bankruptcy schedules in order to be protected. Also, your retirmenet plan must be an acutal retirement plan like a pension, IRA, 401k, etc. You cannot protect a regular savings account, for example, and declare that your intention was always to put that away for retirment. In that case, it would be treated as any other bank account which most people will protect using their "wildcard' exemption of $4,000 in Illinois.
Retirmenet plans are their own category of assets with its own special section of the law which protects it. There are many, many 'categories' of property in bankruptcy, all of which make up the bankruptcy estate. And for each item you own, a determination must be made as to whether or not it can be protected and if so, how much. This should be looked at before you file and certainly before determininig which chapter of bankruptcy you wish to be filing under. Bankruptcy laws are very complex. If you are considering filing, give us a call at 630 250-8813 for our Itasca location or 630 250-8809 for Schaumburg. We'd be glad to help.
What will happen at my 341 First Meeting of Creditors for my Chapter 7 Bankruptcy Case?
A member of the panel of private trustees, usually an attorney, will be assigned to ask you questions at your 341 First Meeting of Creditors. Every Chapter 7 and Chapter 13 debtor has to attend. It is a matter of routine but still must be taken seriously. You will be placed under oath and asked to provide identification. The Trustee's job is to make sure that all of the paperwork was properly filled out, that you understood it, that you disclosed all of your assets and all of your liabilities, to determine in a Chapter 7 if you have anything above and beyond what you are allowed to keep for distribution to your creditors, and so forth. In Chicago and suburban Illinois courthouses, this is usually done inside a tiny room across a desk from the trustee with a small tape recorder on the table with your attorney sitting right next to you.
To call it a first meeting of creditors is a bit of a misnomer because it implies that there will be a second (just like you don’t want to call the first person you marry your “first wife” or “first husband” while you are still married to them). Usually there is only one 341 meeting, unless there is something that needs to be looked into further or if your paperwork needs to be amended. Bankruptcy is a very rule-specific area of law where everything required must be followed strictly. To have a second meeting happens far more often for people who file without an attorney. Your attorney will give you an idea ahead of time as to what to expect so that you are not nervous, and will come with you to the meeting but cannot answer questions for you.
Creditors have the right to show up but rarely do. When and if a creditor shows up, it is usually to talk to your attorney to find out if you would like to sign a reaffirmation agreement so that you can keep some item of secured property, like a washing machine, for re-negotiated terms. This is another of many reasons why you should have an attorney with you for your bankruptcy case, as you may be asked to sign legal documents that may or may not be in your best interest to sign.
How are my debts to the Illinois Tollway dealt with in Bankruptcy?
Debts owed to the Illinois Tollway for unpaid tolls are technically not dischargeable in bankruptcy. This means that in a Chapter 7, you will have to pay the unpaid tolls back once your other debts have been discharged in bankruptcy. They survive the bankruptcy because they are a debt owed to a government (the State of Illinois) that is in the nature of a tax and unless they are more than three years old, are non-dischargeable. However, it has been the practice of the Illinois Tollway to remove the penalties, late fees etc from what you owe. I have also heard of instances where they do not pursue the underlying tolls at all, though this is more likely to happen if the amount of tolls is small. Nonetheless, be prepared to have to re-pay those old tolls. If Chapter 13 is a viable option for you and you owe a lot of money in tolls, you may wish to consider a Chapter 13 plan to deal with them. Remember that if you still owe tolls, your ipass may not be re-enabled until those old tolls are paid, which is why some people will use cash lanes to avoid the problem becoming bigger than what it already is. When you file for bankruptcy, remember to provide your plate number and/or violation notice number so that the tollway can match it up to your filing. While the tolls are not dischargeable in your bankruptcy, the tollway still must respect the automatic stay and leave you alone until the case is over.
What is my Bankruptcy Estate?
When you file for bankruptcy, it creates something called your “bankruptcy estate”, governed by 11 USC 541 of the Bankruptcy Code. Basically, this is everything that you own or have an interest in. Some of it is obvious, for example your house is a part of your bankruptcy estate (even if you have a mortgage on it). Some of it is not so obvious but is still a part of the bankruptcy estate, like what you inherit when someone dies, what you get as part of a divorce settlement, or what you acquire as a beneficiary under a death benefit plan or life insurance policy within 180 days after the petition date.
It is the job of the bankruptcy trustee to review your bankruptcy schedules in order to determine what is in your bankruptcy estate. On your schedules you must list all of your assets and all of your liabilities. You must also answer a series of questions on your statement of financial affairs which further assists in determining the extent of your bankruptcy estate. Your job is to answer all of the questions honestly and completely. You cannot leave anything out or it could be a basis of bankruptcy fraud, which should be taken very seriously. Just because something is part of your bankruptcy estate does not mean that you will lose what you own. Your bankruptcy attorney helps to legally protect what you own by the bankruptcy exemptions that are available to you.
Why are bankruptcy types called Chapters and what do the different bankruptcy chapters mean?
Bankruptcy law is written into the federal law in what is called the Bankruptcy Code. The code is divided up into 9 parts which are called “chapters”.. Unlike books where the chapters are sequential, bankruptcy chapters are 1, 3, 5, 7, 9, 11, 12 (an even number to disrupt the pattern), 13, 15. The first Chapter is very general and applies to all other chapters in the code. Chapter 3 deals with case administration. Chapter 5 is about the bankruptcy estate, creditors and debtors. Chapter 9 applies only to municipalities going bankrupt. Chapter 15 is about international bankruptcy procedure. The four remaining chapters are the ones we most often hear about.
Chapter 7 cases are “liquidation” cases commonly used by people who don’t have any money left at the end of the month and who have lots of debt, typically unsecured debt like credit cards. Chapter 13 is also often used for wage earning individuals who repay a portion of their debt over a number of years as administered and regulated by the bankruptcy court. Chapter 11 of the Bankruptcy Code deals with the reorganization of individuals who used to be affluent and corporations. Chapter 12 is set aside for family farmers.
The bankruptcy code has been re-written several times. The largest change of our time was the 2005 re-write by the Bankruptcy Abuse Prevention and Consumer Protection Act (fondly known as BAPCPA – pronounced Bapseepa). The Bankruptcy Code is one of the most legally complex laws ever written and while bankruptcy is a very useful tool, it is best to seek professional advice as to what chapter, if any, is right for your unique situation. While it is complex, my free paperback book available on this site will help you understand it a bit better. Or, if you are ready to speak to an Illinios lawyer, give us a call at O'Connor Cadiz Law for a no obligation consultation.
Do I have to go to my Real Estate Closing?
Whether or not you have to go to your real estate closing is going to depend in part, on your lawyer. Also, each state is different and this answer is meant to address only real estate closings in the State of Illinois.
Real Estate Seller attendance at closing
Sellers do not need to come to closing in most instances, provided that their lawyer is willing to act as power of attorney for them at closing. I always give my clients the choice because I know that it is a very busy day for the sellers who are moving and attending to a million other little details necessary to walk out of their home for the last time. Also, for some, it can be an emotional time and sellers would rather not have to attend. The majority of documents that need to be signed can be done in advance at the attorney's office. There are other documents that are signed at the closing table, but if you have signed a power of attorney document so that your lawyer can sign things on your behalf at closing, it can all be taken care of without you being present. Just be sure to ask your real estate lawyer if they are willing to give you this option. If so, arrange a time in advance to come to their office to sign documents and more imporantly, so that everything can be explained to you. It is also a very good idea to pay attention to your cell phone while your closing is going on, in case your attorney needs to reach you. If you are working with a realtor, he or she should be bringing keys, garage door openers, etc to the closing to give to the buyers.
Real Estate Buyer attendance at closing
If you are buying a home, you need to go to the closing. There are some very rare exceptions to this so if you know that you are closing on the purchase of a new home, plan on taking the day off. That being said, dates for real estate closings can change so be sure that you have some flexibility with your employer the week of closing. If you are getting a mortgage, you would need to have your lender's permission to have your documents signed by a power of attorney which is also unlikely to be granted.
As the day of your real estate closing approaches, it is bound to be a stressful time. Don't let the legal aspect cause you undue worry. Give us a call and we will make things as smooth as possible for you in the closing of your house. Congratulations!
Joint Debts with your Spouse? To file bankruptcy alone or together?
If you and your spouse hold joint debt that you are both liable for, you might want to consider a joint bankruptcy. If your spouse does not file, creditors can and most likely will pursue him or her for debts that they were also legally liable for. If you file for Chapter 7, creditors can start pursuing your spouse right away as the law affords them no protection. If you file for Chapter 13, the creditor must wait until your bankruptcy plan is over and can then come after your spouse. In most cases, it just makes sense to file a joint bankruptcy with your spouse. However, if your spouse is only joint on one or two smaller and manageable debts, then it might not make sense for him or her to also file. In deciding whether to file your bankruptcy joint or individually, a good starting point is to find out exactly what all of the debts are in your marriage and who is liable for what. Keep in mind that if you are considering a joint bankruptcy, you can only do one jointly with your spouse. You cannot file a joint case with a siginficant other, parent, child, roommate, etc., even if you have debt together.
Bankruptcy laws are tricky and what you don't know could hurt you, or your family. Give us a call and we will be happy to help you figure out whether or not your spouse should also join you in the filing for bankruptcy.
Can Chapter 7 Bankruptcy save my house?
Many people want to know if a Chapter 7 bankruptcy can help save their house. It depends on what you mean by "save the house". You won't lose your house in a chapter 7 if you don't have over the allowable amount of equity in the house (homestead exemption), and you are current on the mortgage. But most people who ask this question really want to know if a chapter 7 will allow them to stop a foreclosure or prevent it from going into foreclosure to begin with. The answer is no. A chapter 7 will delay a foreclosure due to the automatic stay, but the stay only last so long, and during the course of the case itself, the stay can be removed by the bank if they file a motion seeking relief from (or "lifting") the stay. A chapter 7 is usually only a temporary fix to a pending foreclosure and is not what most people use if they want to save their house. The reason that chapter 7 doesn't usually help much for people who are behind on the mortgage is because chapter 7 eliminates unsecured debt, like credit cards and medical bills. It doesn't elimiate debt that is secured, meaning debt that is backed up by collateral- in this case, your house. The bank's lien on the house stays put in bankruptcy.
If you are behind on the mortgage and want to keep your house, a strategy session with a bankruptcy lawyer is in order. We will first look at whether or not saving the house makes good financial sense, and if it is feasible for you. If so, you may wish to consider a chapter 13 bankruptcy. Chapter 13 would allow you to pay back what you fell behind on, over a period of 3- 5 years. It stops a foreclosure dead in its tracks. That being said, chapter 13 is not for everyone. I strongly encourage you to give our office a call if you live in the Chicagoland area and are considering your options when it comes to keeping your house. We can be reached at 630 250-8813 for a free, confidential and no-pressure consultation.
Can I protect an Inheritance from my Bankruptcy?
An inheritance can be a mixed blessing for those thinking about filing for bankruptcy. I've seen people who are the perfect candiates for bankruptcy, only to have a wrench thrown into their plans when someone dies and leaves them money or a house. On the one hand, this is the time in their lives when they probably most need their inheritance, yet it disrupts what could have otherwise been a successful bankruptcy. Under bankruptcy law, you are entitled to the inheritance once the person leaving it to you actually dies, regardless of when you actually receive it. The inheritance is usually a real asset. In other words, real money or real property is coming in. If someone has already filed for bankruptcy, they must notify the bankruptcy court - usually through their lawyer- if an inheritance becomes an issue. The law says that if someone receives an inheritance within 180 days after they file, it is part of the bankruptcy estate. This means that a bankruptcy trustee can take it to pay off creditors. Everyone is allowed certain "exemptions"- or money/property that they can keep, but only up to a certain dollar amount. Anything above and beyond this is usually going to be fair game.
If you are facing the possiblitly of bankruptcy but also know that an inheritance is coming your way, give us a call to discuss your options.