BANKRUPTCY IN PLAIN ENGLISH

Your Rights as a Homeowner in Illinois

2010-02-10T07:27:00.000-08:00

A home mortgage is a legal contract between a lender and a buyer that makes the buyer’s home collateral (security) for the loan.

When the buyer (homeowner) does not make payments as agreed, the lender may take the property from the buyer through the legal process called foreclosure. In Illinois, the typical foreclosure takes 6 to 9 months.

When Foreclosure Begins

When your mortgage payment is late for the third time, the lender sends your loan to its lawyer to start the foreclosure process. The lender’s attorney orders a title report, which gives the lawyer the following information:

-- The name of the property owner,

-- Any other unpaid deeds of trust or mortgage loans against the property,

-- Any other restrictions on the property, such as a mechanic’s lien (when the property is used as security for a debt, often by workmen who have done work on your home), and covenants (agreements that dictate how the property can be used).

After the lender’s lawyers review the title report, they write a foreclosure complaint (lawsuit) that alleges you failed to pay the mortgage and, as a result, your property is now the subject of foreclosure (seizure). The lawyers also prepare the related paperwork including a summons, which orders you to appear in court at a specific date and time.

Next, the lawyers file the foreclosure lawsuit in court and serve you with the summons to appear in court. “Service” is the term that means when the lender’s legal paperwork is given to you. At the same time, the lawyers record a “Lis Pendens” with the Recorder of Deeds. This prevents you from selling your home until the foreclosure process is completed.

Then, within 60 days, the sheriff or a process server gives you and all people with an interest in the property the Foreclosure Complaint. If they cannot reach you or the other parties in person, the law allows them to “serve” the parties by publishing a notice in the newspaper.

In 14 days, the lender’s lawyer reviews the court file to make sure all parties have been served. Then the lender’s lawyer files a notice of motion asking that the court enter a Foreclosure Judgment against you. The notice of motion tells you the time and date when you are to appear in court.

How to Reinstate Your Mortgage

After you receive the notice of motion, you have 90 days to reinstate your mortgage loan. You can do this by paying the money you owe on your mortgage, as well as all costs and fees. If you reinstate your mortgage, you cannot do that again for 5 years.

When you appear in court, any of the following can occur:

-- Continuance: You can ask the court for a continuance so you have time to hire a lawyer. A “continuance” means you’re asking the judge to delay his decision and set a new court date;

-- Appearance and Answer: You can ask the court for more time to file an appearance and answer. These are forms you file if you want to represent yourself, rather than hiring a lawyer, and if you think you have a valid defense against the foreclosure proceeding;

-- Trial Date: If the court believes you have a defense available to you, the court could set your case for trial. If you do not have a valid defense, the court may enter a judgment against you. (This will not likely occur at the first court date.)

-- Judgment Against You: If you lose your case at trial -- or if you do not reach an agreement with the mortgage lender -- then the court can enter against you a judgment of foreclosure and sale, meaning you have no ownership interest or rights in the property.

How to Save Your Property

When the court enters a judgment of foreclosure against you, your redemption period begins. This is the time during which you can save your property.

Your period of redemption expires on the latest of these dates:

-- 7 months after the date you were served with the foreclosure complaint, if you live in the home;

-- 6 months after the date you were served if you do not live in the home; or

-- 3 months after the court enters a judgment against you.

To redeem (or save) your home, you must pay the amount of the foreclosure judgment. This includes all money you owe under the mortgage, plus all court costs, lawyers’ fees and taxes.

Before the foreclosure sale can take place, the lender must publish a notice of sale at least 3 weeks in a row, once per week, in a the real estate section of a newspaper “of general circulation”. Most lenders publish the notice in a local newspaper during the redemption period.

The lender is not required to mail you a notice of the foreclosure sale. Then, within 7 days after the redemption period ends, your home is sold at the foreclosure sale.

The Court Confirms the Sale

After the sale, the lender files a motion in court asking the court to confirm the foreclosure sale. In most cases, the court confirms the foreclosure sale unless you can prove one of the following:

-- The lender did not give notice in the manner required by law;

-- The terms of the sale were not reasonable;

-- The sale was fraudulent or dishonest; or

-- Justice was not served.

If the home’s selling price is less than the amount you needed to redeem your property -- and if the lender purchased your home -- then you have a special right of redemption. To redeem your home, you must pay the actual selling price, any other costs and fees approved by the court, plus interest. Your special right to redeem your home ends 30 days after confirmation of the sale.

At the time of confirmation, the court gives the buyer (the lender or a third party) possession of the property. In most cases, the court gives you 30 days from the date of confirmation to leave your home. After the 30 days have expired, you have no legal right to remain in your home. If you do not leave on your own, the lender can ask the sheriff to physically remove you from the property.

After you leave the home, the new owner records a foreclosure deed, which says the foreclosure has taken place. This becomes a matter of public record.

You’re Invited to Call or E-mail.

“If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications,
tax liens or other financial problems, please send your e-mail today to
rich@chicagomoneylawyer.com or call 312-969-0730.” -- Rich

RICHARD FONFRIAS, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Money problems solved. Peace of mind protected.

Founder & Managing Partner
FONFRIAS LAW GROUP, LLC
First National Plaza  70 West Madison Street, Suite 1400  Chicago, Illinois 60602
Telephone 312-969-0730  Facsimile 312-624-7954  www.chicagomoneylawyer.com

E-mail rich@chicagomoneylawyer.com

  

How Do I Make Sure the Chapter 7 Trustee won't take my property?

2009-12-16T19:06:00.000-08:00

In a chapter 7 bankruptcy, you are required to give the trustee unprotected property that you owned at the time of filing. So before you file for bankruptcy, it’s wise to limit the value of your unprotected property with some advanced planning.

The most common assets trustees look for include:

(1) cash,
(2) bank accounts,
(3) landlord and utility deposits,
(4) tax refunds,
(5) sporting goods.

By reducing the value of these assets, you are not cheating or acting illegally; you are simply using the law to your advantage, much like using tax laws to determine the best time to sell property.

Cash. No cash on hand before filing a chapter 7 bankruptcy is the best way to go. Further, if you have received cash or a paycheck or closed a bank account shortly before filing your case, you should use those funds before filing your bankruptcy. You should use those funds for valid purposes and keep receipts so you can prove the funds were properly used.

Money that you have before filing your chapter 7 bankruptcy may be used for (1) food, (2) groceries, (3) the chapter 7 filing fee, (4) the attorney’s fee in the chapter 7 case, and (5) the payment to creditors whose claims you intend to reaffirm and continue paying after filing bankruptcy.

You can also make your annual IRA contribution or to any other exempt pension plans, they are generally protected. Use cash or other liquid assets to pay off debts that will not be dischargeable, such as taxes. You may take out a life insurance policy, which will be exempt. Do not make gifts or loans to friends or relatives, however, because the trustee may later seize these payments.

Bank Accounts. All bank accounts should be closed before filing a chapter 7 bankruptcy. If a bank account is not closed, the account balance should be as close to zero as the bank allows and all outstanding checks must clear the account before the bankruptcy is filed. Un-cashed checks could be deemed an asset to be paid to the trustee.

Landlord and Utility Deposits. Unless these deposits are exempt, you should try to get a refund of all landlord and utility deposits before filing your chapter 7 bankruptcy. Otherwise, you may have to turn the funds over to the trustee.

Tax Refunds. If you expect a tax refund, you should file your chapter 7 case after you receive and properly spend your refund. The best strategy is to either file the chapter 7 case early in the tax year (but after the refund from the previous year has been received and spent) or make arrangements to insure that there will be no tax refund for that year.

Sporting Goods. Items that are uniquely valuable like guns, fishing gear, skis, cameras, and similar items should be disposed of before filing. Otherwise, you may have to turn over the items -- or their value in cash -- to the trustee.

If you want more information about bankruptcy and non-bankruptcy options, talk with an experienced financial rescue and bankruptcy lawyer.

You’re Invited to Call or E-mail.

“If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications,
tax liens or other financial problems, please send your e-mail today to
rich@chicagomoneylawyer.com or call 312-969-0730.” -- Rich

RICHARD FONFRIAS, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Money problems solved. Peace of mind protected.

Founder & Managing Partner
FONFRIAS LAW GROUP, LLC
First National Plaza  70 West Madison Street, Suite 1400  Chicago, Illinois 60602
Telephone 312-969-0730  Facsimile 312-624-7954  www.chicagomoneylawyer.com

E-mail rich@chicagomoneylawyer.com

  

Should I Hire a Lawyer to Handle My Bankruptcy?

2009-12-02T02:37:00.001-08:00

The answer depends on the type of bankruptcy best suited for you -- and how important it is that you do everything correctly the first time.

Bankruptcy laws are federal laws. Your bankruptcy will take place in Bankruptcy Court, which is a division of the U.S. Federal District Court.

Our legal system has 6 types of bankruptcies, some for consumers and others for businesses.
Consumers usually file either Chapter 7 or Chapter 13 bankruptcy. To decide which is better for you, you need to know and understand the bankruptcy laws and the important differences between the two.

If you decide to file Chapter 7 Bankruptcy (liquidation), you need to complete the mountain of paperwork required by the Bankruptcy Court. In this paperwork, you need to list your assets (your property) and your liabilities (your debts) -- and identify the property that is exempt, which the law allows you to keep.

If you decide to file Chapter 13 Bankruptcy (repayment), you need to fill out a ton of paperwork -- negotiate with your creditors -- work with the Chapter 13 Trustee -- and draw up a plan describing how you intend to repay your creditors. Then your repayment plan must be approved by the Bankruptcy Court.

If you make mistakes on the Chapter 7 or Chapter 13 forms, the Bankruptcy Court will reject your bankruptcy and send you back to square one.

As you can see, regardless of whether you want to erase your bills or set up a repayment plan, hiring an experienced bankruptcy lawyer is a smart decision.

Note: If you have very little property, you may be able to file a Chapter 7 Bankruptcy without hiring a lawyer. This may sound attractive because you’d like to save the attorney’s fee. But if you make a mistake and the Bankruptcy Court rejects your application, you’ll quickly see that trying to handle your own bankruptcy was a mistake.

Even worse, if you list “exempt property” that the law does not allow -- or if the Bankruptcy Trustee takes assets to settle debts with your creditors -- or if you choose the wrong type of bankruptcy and lose the equity in your home -- you’ll wish you had a bankruptcy lawyer representing you.

Now, good news: Most bankruptcy lawyers will talk with you without charge. Don’t try to make these important and difficult decisions on your own. Talking with an experienced bankruptcy lawyer is the best way to protect your property, erase your debts and get the fresh start you want and deserve.
You’re Invited to Call or E-mail.

“If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications,
tax liens or other financial problems, please send your e-mail today to
rich@chicagomoneylawyer.com or call 312-969-0730.” -- Rich

RICHARD FONFRIAS, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Money problems solved. Peace of mind protected.

Founder & Managing Partner
FONFRIAS LAW GROUP, LLC
First National Plaza  70 West Madison Street, Suite 1400  Chicago, Illinois 60602
Telephone 312-969-0730  Facsimile 312-624-7954  www.chicagomoneylawyer.com

e-mail: rich@chicagomoneylawyer.com

  

Credit Card Charges, Installment Loans & Medical Bills Cause Bankruptcies to Soar

2009-12-02T02:26:00.000-08:00

It’s a nasty habit. Even an addiction. It costs a fortune. And it’s causing bankruptcies to skyrocket. What is it?

Buying things on credit, aka buying things “on time.”

Here’s what often happens. (Does the following sound familiar?)

You start charging things to your credit card. Month after month, the amount you owe increases. Your minimum payments get bigger and bigger. When you run out of cash each month, you use your credit card for living expenses. And your balances keep rising.

Your savings account bottoms out. Money you had planned to save now goes to credit card payments. You see that month after month you’re making payments on items you bought years ago! So that big-screen TV that you bought 3 years ago for $2,000 because it was “on sale” has already cost you $3,000, when you add the interest.

Now, where will you get the money to repair your car? For your son’s college tuition? Your daughter’s wedding? Or that special vacation you promised your spouse?

Interest -- whether on a credit card or an installment loan -- is expensive. It will cost you a fortune. For example:

With a balance of $3000 on one credit card at an interest rate of 19%, your monthly minimum payment of 2.5% of the balance with no other charges is $75. With only a minimum payment month after month, it will take you 283 months to pay off that one debt -- more than 23 years. For one card with a $3000 balance! And making just a minimum payment each month will cost you $4,729.44 in interest! Most Americans have 6-10 credit cards.

Credit purchases cause all sorts of problems: They choke the life out of the buyer until the item is paid off. They increase the cost of the item bought on credit. And they raise the amount of money needed to pay monthly bills.

The result?

Credit card debt and “on-time” installment purchases are causing bankruptcies to skyrocket. Because the debt has grown so big that the buyer can no longer pay it off.

If the buyer/debtor cannot work out an affordable plan to get out of debt, I suggest he consider Chapter 7 or Chapter 13 bankruptcy. Chapter 7 (liquidation) erases most of the person’s debt. And Chapter 13 (repayment) allows the debtor to negotiate a payment plan with creditors and then, with the Bankruptcy Court’s approval, start paying down his debt.

Another huge problem that forces bankruptcies is medical bills, which resulted in half of the 1,458,000 personal bankruptcies in 2001. (Study published in the journal Health Affairs.)

According to the study -- carried out by researchers at Harvard Law School and Harvard Medical School -- medical bankruptcies impact 2,000,000 Americans each year, including debtors and their families. And while over 75% of these families had health insurance when the illness began, 38% lost coverage -- some only temporarily -- by the time they filed bankruptcy.

Families that filed bankruptcy endured many hardships: 30% had at least one utility cut off. And when medical care was needed, 61% chose to go without.

The bankrupt families were mostly middle class. 56% owned a home and 56% attended college. Often, illness forced income-earners to take time off work, resulting in lost income and lost health-insurance benefits.

If you want more information about bankruptcy and non-bankruptcy options, talk with an experienced financial rescue and bankruptcy lawyer.

You’re Invited to Call or E-mail.

“If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications,
tax liens or other financial problems, please send your e-mail today to
rich@chicagomoneylawyer.com or call 312-969-0730.” -- Rich

RICHARD FONFRIAS, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Money problems solved. Peace of mind protected.

Founder & Managing Partner
FONFRIAS LAW GROUP, LLC
First National Plaza  70 West Madison Street, Suite 1400  Chicago, Illinois 60602
Telephone 312-969-0730  Facsimile 312-624-7954 
www.chicagomoneylawyer.com
e-mail: rich@chicagomoneylawyer.com

  

Bankruptcy and Divorce

2009-10-28T11:50:00.000-07:00

Spouses often use bankruptcy differently. Some spouses use bankruptcy after a divorce has been finalized as an offensive weapon to delay or prevent having to refinance a mortgage. Other couples file bankruptcy before a divorce to simplify the debts before they separate. So how you use bankruptcy depends on your goals in the divorce. Generally it’s wise to file a bankruptcy before divorce so you know how the debts are going to be handled.

When one spouse files a bankruptcy after the divorce, creditors usually come after the other spouse to satisfy jointly incurred marital debts. This means that one spouse’s bankruptcy filing could send the other spouse into bankruptcy.

Your bankruptcy estate is everything you own at the time the bankruptcy is filed. When spouses file bankruptcy, all property acquired during the marriage is included and potentially available to pay debts. Your bankruptcy estate is everything you own at the time the bankruptcy is filed.

Once the bankruptcy is filed, the court issues an immediate stay to stop creditors from collecting debts. Your spouse will still have to pay child support or alimony; however, they may not have to perform other tasks, such as refinancing to remove one spouse from the mortgage.

I am involved in a case now where the wife is under a court order to refinance and remove her husband’s name from the mortgage. For the last several years she has not complied with the order. The wife filed a bankruptcy to restructure her debts and the divorce court is powerless to force her to complete the refinance.

Whether the bankruptcy court discharges a divorce property settlement will depend on whether the debtor can show they cannot pay the debt and still take care of themselves, their dependents, and their business. Generally, property settlements are not dischargeable in bankruptcy.
Exempt property is protected and not available to be sold to pay debts. Each state where a bankruptcy is filed has its own exemptions., For example, in Illinois each filing spouse can “exempt” $15,000.00 of home equity.

An effective way to protect yourself against your spouse filing a bankruptcy is to take lien on property your spouse gets in the property settlement. This makes you a secured creditor. If later, they file a bankruptcy you can repossess the property to pay the debt.

How different debts are treated in Bankruptcy

2009-10-20T00:40:00.000-07:00

Debts Dischargeable in Chapter 7

• Personal loans -- such as money borrowed from friends
• Credit cards
• Repossession deficiencies
• Auto accident claims
• Health care bills
• Judgments
• Debts from a Business
• Leases
• Guaranties
• Negligence claims
• Tax penalties over 3 years old
• Non priority taxes

Possibly Dischargeable in Chapter 7

• Willful and malicious injuries to others
• Embezzlement
• Fraud or dishonesty
• Debts arising from breach of fiduciary duty

Need Chapter 13 for:

• Luxury purchases on credit within 90 days of filing
• Cash advances of over $750 within 70 days of the filing date
• Debts for loans taken out against retirement accounts
• Trust fund taxes
• Child or spousal support
• Fines, penalties, restitution
• Accident suits involving intoxication
• Debts not listed -- see below
• Penalties payable to the government other than tax penalties
• Student loans
• Debts in prior bankruptcy and debtor was denied a discharge
• Taxes for years where return was unfiled or filed for less than 2 years
• Taxes for which no return has been filed
• Taxes first due within three years of the bankruptcy
• Taxes assessed within 240 days (8 months) of the bankruptcy filing. “Assessed” means you did not file a return, so the IRS computed how much they think you owe.

What happens if there's a divorce during a jointly filed bankruptcy?

2009-09-28T18:20:00.000-07:00

If a married couple files a Chapter 13 bankruptcy, and then divorces the law allows them to sever the case and convert to Chapter 7 at any time without agreement. To disallow this could allow one spouse to take advantage of the other in a divorce situation.

Misconceptions about Bankruptcy

2009-08-14T20:33:00.000-07:00

Know the Facts and Your Rights Under Bankruptcy Law
By Richard Fonfrias

It's important to understand what your rights are under the law governing bankruptcy. In an attempt to clarify the subject, the following article addresses the 11 most common misconceptions about bankruptcy.

MISCONCEPTION #1: Bankruptcy is dishonest.
Not true. Most people honestly want to pay their bills, but sometimes things happen that make it impossible. These things include an unexpected lawsuit, judgment or income tax bill, a fine that was considered excessive or in dispute, and more. Bankruptcy is a legal right that is provided for in the United States Constitution. Bankruptcy is a right that protects honest people from harassment, lawsuits, wage garnishment and other creditor actions. Bankruptcy allows a fresh start.

Bankruptcy has been used by many of our nation's largest companies, including Texaco and America West Airlines, as well as famous people like Jerry Lewis, Kim Basinger, David Bowie and Anita Bryant. The same laws that are routinely used by corporate America, and the rich and famous, protect you, your family and your business, too.

MISCONCEPTION #2: I will lose all my property in a bankruptcy case.
Not so. The bankruptcy laws are designed to allow a fresh start. A fresh start would be impossible if you would lose all your property. The fact is that most people don't lose anything in their bankruptcy. The bankruptcy law allows the state government to decide what property is protected for bankruptcy cases filed in the state. In Illinois, you are allowed to keep most personal and household property, equity in your home up to $15,000 per person, some equity in a car, most retirement plans, and many tools of the trade.

MISCONCEPTION #3: I can't own anything after bankruptcy.
Not true. In Chapter 7 you can keep the property that is protected in the bankruptcy. A Chapter 13 or Chapter 11 allows you to keep your property and repay debts over time. Many people buy and refinance cars and homes after filing a bankruptcy.

MISCONCEPTION #4: I will never be able to establish credit after a bankruptcy.
Not true. Today, many stores and banks actively market to people who have filed bankruptcy. Mortgage companies do help applicants get new mortgages with a bankruptcy after two to three years. As a practical matter, you only file a bankruptcy when you can't pay your bills. Because of that, your credit is probably already bad. A bankruptcy won't make it any worse. Bankruptcy puts you in a better position to pay current bills and that should improve your chances of getting new credit.

MISCONCEPTION #5: Bankruptcy gets rid of all debts.
Not so. Although most consumer and business debts are wiped out in bankruptcy, some debts are not affected. Certain debts can't be eliminated in bankruptcy. They include child support, alimony, fines, restitution, some taxes, loans obtained by fraud, student loans, debts due to a DUI, and debts resulting from "willful and malicious" harm. Some of these can be handled effectively in a Chapter 13 bankruptcy.

MISCONCEPTION #6: I can protect my property by hiding it or giving it away before I file bankruptcy.
No. It's a crime to hide property. It's also a crime to give property away without telling the Court in the bankruptcy filing. The trustee will seek to recover any property you wrongfully transferred prior to a bankruptcy filing. You could end up in jail by attempting to illegally hide or transfer property.

MISCONCEPTION #7: I will lose my job if I file bankruptcy.
Not true. The bankruptcy code prohibits an employer from discriminating based on a bankruptcy filing. In nearly 10 years of helping people in bankruptcy cases, I have never even heard of someone losing a job because of a bankruptcy filing.

MISCONCEPTION #8: I filed a bankruptcy before, so I can't file again.
Incorrect. The law prohibits getting a Chapter 7 discharge within eight years of a previous Chapter 7 discharge. But, even within the eight-year time period, a Chapter 13 bankruptcy may be filed. Don't hesitate to call me if you have filed a previous bankruptcy. You still have many options.

MISCONCEPTION #9: I am not allowed to have a checking account if I file bankruptcy.
Incorrect. No rule stops you from keeping or opening a bank account. Most people keep the account that they had and continue to use it without interruption. In other cases, it may be smart to close an existing account prior to filing bankruptcy. That's because the bank involved may be a creditor in the bankruptcy. In general, if you do not owe any money to the bank where your account is, there is no reason to close the account.

MISCONCEPTION #10: Taxes cannot be eliminated in bankruptcy.
Wrong. Many taxes are eliminated in bankruptcy. There are several complex rules that apply. Eliminating taxes depends on how old the taxes are, when the returns were filed, and whether the taxes have been assessed, and the type of taxes. Both federal and state income taxes can be eliminated in bankruptcy. And even in cases where the taxes cannot be eliminated, it's often possible to force a payment plan on the IRS and stop interest and penalties from being added.

MISCONCEPTION #11: I must be broke to file bankruptcy.
Not really. Although it would not make much sense to file bankruptcy when you are not in financial trouble, there is no requirement that a person be destitute. The bankruptcy code doesn't require that you be unemployed, homeless, or own no property. In fact, you are able to file bankruptcy without losing your job, giving up your home, or having your property taken away.

Bankruptcy or Debt Consolidation?

2009-06-27T16:39:00.000-07:00

Bankruptcy is court ordered protection from debt, it does not require agreement from your creditors. To make sure your debts will be erased, you should file bankruptcy. A Chapter 13 discharge includes all the debts dealt with in the plan, even if no payments are made. A Chapter 7 discharge erases most debts with a few exceptions. Unfortunately, many clients find me after they have already wasted large amounts of money, and time in consolidation scams.

As soon as your bankruptcy is filed, creditors must immediately stop all collection activity; in fact, if you file bankruptcy immediately after your car is repossessed the creditor has to immediately return it and ask questions later. No debt consolidation plan offers the kind of protection you get in bankruptcy.

Bankruptcy Explained

2009-04-12T09:09:00.000-07:00

Bankruptcy is protection, it lets a person or business, in financial trouble pay off debts by dividing assets among creditors. Certain types of bankruptcy let a person or business use income to pay off debts. When finished, debts are erased and hope is restored.

Bankruptcy also lets a person or business free themselves from financial obligations, even if the debts are not paid in full. Hearings take place in the United States Bankruptcy Courts .

The most common type of bankruptcy is Chapter 7; in this type a trustee collects unprotected property, sells it and distributes proceeds.

Under Chapters 11, 12, and 13 income is used to pay off debts. A trustee is appointed to supervise assets. Generally after a bankruptcy is filed creditors must stop collection activity.