FAQ's. Common Questions answered here.
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, 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.
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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.
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.
If I file for bankruptcy, how can I protect what belongs to my children?
As parents, we want to make sure that our children are protected and the same holds true when considering a bankruptcy.
Kids' Stuff and your bankruptcy
In Chapter 13 bankruptcy, for the most part you will be keeping your property. In a Chapter 7 bankruptcy, you are allowed to keep property that is "exempt", or protected up to a certain dollar value - depending on what it is. One of the questions that your bankruptcy lawyer will ask, and will report on your bankruptcy schedules, relates to what you have at home by way of furniture, electronics, and what most people think of generally as "stuff". When mentally arriving at their childrens' rooms when answering this question, people invariably say something like "the bunk beds, a desk, computer, dresser... but that isn't mine, it belongs to my son/daughter". If your child lives with you and these are items that you bought for him or her, the bankruptcy court considers it as being yours. On the other hand, if your child is older and paid for it himself and you can prove it, then it doesn't count as part of what we call the bankruptcy estate. Don't stress out to much over this unless there is something in your kid's room of great value. Most people in a chapter 7 actually find that the items in their home are not worth more than what you are allowed to keep and even so, most bankruptcy trustees will not be interested in taking your child's desk.
Kids' Bank Accounts and your bankruptcy
If your child has an account set up under the Uniform Gifts to Minors Act or the Uniform Transfer to Minors Act (I can help you figure this out if you aren't sure), your child's money is safe, even if you are the custodian of those accounts. Likewise, if they have 529 Educational funds set aside for college, this is not legally your money and therefore is safe from your creditors and from the bankruptcy trustee, depending on when in time the money went in. That being said, as with anything in bankruptcy, you have to beware of the timing and be sure that it did not get transferred into your child's account for purposes of your bankruptcy filing, which is a huge no-no.
Bankruptcy is complex but doesn't have to be scary. Once in the right hands, your bankruptcy lawyer will answer any questions that you have about your children's money and personal property. We don't want to do anything that doesn't make sense for you or your family. If you are considering filing for bankruptcy and want to know more about how this could affect your kids, give us a call at 630 250-8813 to schedule a free bankruptcy consutlation in Schaumburg or Itasca.
How do I determine how much I should sell my house for?
If you are selling your house and are trying to figure out how much money to sell it for, you are asking the wrong question. What you should be asking yourself is how to find the best team of real estate professionals who will help you to maximize profit on the sale of your house while taking the stress out of it for you. Your real estate attorney does not negotiate price for you. While lawyers are trained negotiators, when it comes to the housing market in Illinois, it is actually the realtor's job to negotiate the best price for your home. The right real estate agent for you should know the market in your geographical area, and know it very well. Dealing with home values in your neighborhood is what realtors do day in and day out, and this is why it is best to leave the pricing of your house to them. Neither you nor your attorney should be setting the price of your home. While you are the one who is most familiar with the ameneties, beauties and flaws of your home, your realtor will be able to give you a realistic idea as to what you should list the house for and what amount you should accept. Knowing how to price a home correctly is an art and draws upon the realtor's experience as well as solid data such as "comps", or comprarable recent sales of similar homes in your neighborhood. The realtor will base the asking price on the current market in your area, the size of your house, the amenities, the condition, and so forth. Ask for a range and have your realtor run numbers for you so that you will have an idea as to how much money you are likely to walk away with. Remember, your realtor is earning a commission off of the amount of money that you sell your house for, so it is in his or her best interest to obtain top dollar for you.
Once your realtor has negotiated a price and you have a buyer locked into a contract, the realtor's job is for the most part complete. In Illinos, you will need a real estate attorney to do the rest. To learn about what your real estate attorney will do for you, be sure to request a free copy of our Homeseller's Guide, which also contains handy worksheets to help you figure out how much profit you will make on the sale of your home. Or give us a call at 630 250-8813 and I'd be happy to talk to you about the process.
What's the difference between a property survey and an appraisal?
Sometimes people buying or selling real estate confuse property surveys with appraisals, and vice versa. Different states will use them differently, and this article addresses how property surveys and appraisals are used in Illinois real estate transactions, and the difference between the two.
A property appraisal is a formal report, usually done for the benefit of the bank, stating how much the property is believed to be worth at fair market value. The appraisal takes into account the neighborhood, size and age of the house, amenities, overall condition and so forth. If the property appraises too low, the bank may reconsider giving a mortgage to the buyer. A good real estate attorney will also make sure to protect buyers from over paying for the house in case it appraises lower than the agreed upon price.
A property survey is not ordered by the bank, but is typically ordered by the seller as most Illinois contracts require one for the sale of a single family home. The survey looks like a large blueprint of the land and is used to determine property boundaries. They are used to be sure that there aren’t any legal issues that could come up, for example- if your driveway was partially built onto the neighbor’s property. Surveys also pinpoint exactly where there may be any easements, typically for use by utility companies. Survey issues may affect the marketability of the house. If you are selling your house, I take care of ordering the property survey for you prior to the closing.
Selling a home is more than just an exchange of money for keys. The contract that you signed has many moving parts, placing time bound obligations on both buyer and seller. Give us a call at 630-250-8813 and we can take the worry out of your hands and handle all aspects of the real estate closing for you (except for packing. We’ll leave that to you).