DuPage County Bankruptcy Attorney

Controlling Debt to Avoid Bankruptcy

May 17 2012

Most Americans that are in debt have a lot of it—and credit cards are, by far, the biggest culprit. U.S. consumers hold nearly 610 million credit cards, and the total credit card debt in the U.S. was $2.5 trillion at the end of 2011, according to CreditCards.com. Mortgages, student loans, and medical bills are also high on the list of debt-causers; all of which can be devastating enough to lead to bankruptcy. The easiest way to avoid bankruptcy is, of course, to get out of debt. The trick is knowing who to turn to do this, and what expenses can be cut out before seeking outside help.

The Bankruptcy Reform Law was passed in 2005, and one of its provisions was that “consumers filing for bankruptcy will be required to go through a government-approved credit counseling program within six months before they file for bankruptcy protection,” according to the Federal Trade Commission. Some government-approved counseling can be done over the phone; this depends on the specific agency.

While this can incur an expense around $50 per session, government-approved agencies MUST waive this fee if the person seeking counseling can prove an inability to pay. The agency will then provide a certificate that a person wishing to file bankruptcy must show in court—some agencies require an additional fee to produce the certificate. This is, of course, important to ask before agreeing to the agency’s services.

There are, however, several sources to turn to before it gets to this point—these types of counseling services have multiplied as a result of the recent economic downturn. InCharge Debt Solutions is one such independent service, offering counseling services in everything from housing to credit cards. The Association of Credit Counseling Professionals is another resource that can lead you to find the right debt counselor for you.

If you’ve gone through credit counseling and bankruptcy is still the best option for you, don’t go through it alone. Contact a dedicated Chicago bankruptcy attorney today.

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Bankruptcy / Chapter 13 Bankruptcy —

Advantages of Chapter 13 bankruptcy over debt settlement

May 16 2012

Debts can be a big threat to your financial and mental well-being. If you’re overburdened with debt, you should look for an effective method which can help you to alleviate your debt troubles. Two of the most popular methods to mitigate debt crisis are Chapter 13 bankruptcy and debt settlement. Though both the methods can be helpful in clearing debts, Chapter 13 bankruptcy can be more beneficial than debt settlement. Go through the article to know more about Chapter 13 bankruptcy and debt settlement. You will also know why Chapter 13 bankruptcy can be better option than debt settlement.

Chapter 13 bankruptcy

Chapter 13 bankruptcy involves legal intervention to handle your debts. It is a process by which you’ll receive a repayment plan from the court in order to clear your debts within a period of 3-5 years. In case you’ve defaulted on your mortgage payments and your house is heading towards foreclosure, you can file for bankruptcy to stop foreclosure. Chapter 13 bankruptcy can halt foreclosure proceedings and give you time to save your house.

Debt settlement

Through debt settlement, you’ll be making partial payments to your creditors instead of the full amount that they owe from you. All your unsecured debts can be cleared through this method. You can seek professional assistance for this purpose. There are a number of companies which provide debt settlement services. The representatives of a debt settlement company will negotiate with your creditors to accept a partial payment from you. They would open a “trust account” for you, where money will be stored for paying your creditors.

Why should you choose Chapter 13 bankruptcy over debt settlement?

Read along to know about the advantages of Chapter 13 bankruptcy over debt settlement:

Your lenders have less control in case of Chapter 13 bankruptcy – When you file for bankruptcy, the lenders are bound to follow the orders of the court. In case of debt settlement, it is not mandatory for the lenders to accept the debt settlement program. They may not agree to it.

Both your secured and unsecured debts are handled by Chapter 13 bankruptcy – This is a major advantage of Chapter 13 bankruptcy. It is very important to clear your secured debts. You may loose your valuable properties like house and car if you fail to do so. Chapter 13 bankruptcy provides you a repayment plan paying off both your secured and unsecured debts. In case of debt settlement, only unsecured debts are dealt with.

The risks of debt settlement are not found in Chapter 13 bankruptcy – There are many instances where debt settlement companies have engaged in fraudulent activities. You may become a victim of debt settlement scam if you fail to choose a good debt settlement company. On the other hand, bankruptcy is a legal and safe procedure to clear your debts.

Thus in many respects, Chapter 13 Bankruptcy can be better than debt settlement. However, debt settlement has a less severe impact on credit score than Chapter 13 bankruptcy. By going for debt settlement, your credit score can drop by 70-125 points. In case of Chapter 13 bankruptcy, your credit score can drop by 200-250 points.

Bankruptcy / Bankruptcy Alternatives / Chapter 11 Bankruptcy / Life After Bankruptcy —

Gyms Declare Bankruptcy as Americans Cut Expenses

May 15 2012

It was announced in mid-April that under an agreement filed in U.S. bankruptcy court, John F. Brinson, CEO of Lehigh Valley Racquet and 24/7 Fitness Clubs, would step down from his longtime position. This came after Brinson filed for Chapter 11 reorganization last month, “citing about $12 million in debts,” according to The Morning Call. The club’s three locations will now be headed by Doug Cash, a fitness club consultant based in Chicago and Nova Bank, “which holds $8.6 million of the 24/7 Fitness Clubs’ loans, agreed to the leadership change,” the bank’s lawyer told The Morning Call.

As Americans look to cut expenses from their monthly budgets in light of a troubled economy, gym memberships are often among the first to go. In a poll conducted by Yahoo! Health and Reader’s Digest, reported this March on BusinessNewsDaily.com, 21 percent of respondents said that they couldn’t afford a gym membership, and “that they’d rather gain weight than take on more debt.” It is perhaps this mindset and lack of disposable funds that have led to a slew of gyms declaring bankruptcy in recent years—including Bally Total Fitness in 2007, a couple of Gold’s Gym franchises in 2011, and the upscale David Barton chain in New York.

Cutting out extra expenses such as gym memberships can, in fact, be one easy step toward reducing expenses and getting out of debt. If you’re too deep into debt for small steps such as this, contact an experienced Chicago bankruptcy attorney today. We can help you to get back on track—even if not the treadmill.

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Bankruptcy / Medical Bills —

Gov. Quinn Proposes Cuts to Medicaid

May 12 2012

With the financial state of Illinois teetering more toward bankruptcy than ever before, Governor Pat Quinn took the scalpel to state entitlement programs late this April, according to the Chicago Tribune. The hardest hit, according to Local ABC 3 will be the state’s Medicaid program, from which an estimated 215,000 people will be cut. Medicaid isn’t the only program to be effected, however—Quinn’s proposal will also raise cigarette taxes by one dollar. Quinn told ABC that he knew assembly members wouldn’t be “wildly excited” about the plan, but that “if we don’t do this, then the whole system will collapse. And if the whole system collapses, there won’t be jobs for people, so we have to make necessary steps in order to rescue the system.”

Quinn’s proposal would cut $1.35 billion out of the system, and “reduce the rate the state pays to save another $675 million,” according to Local ABC 3. Enrollment in Illinois’ Medicaid program has steadily increased since 2007, presumably due to the economic downturn, according to federal Medicaid statistics. In 2010, there were 3,017,131 Illinois state residents enrolled in the program, creating a whopping bill of more than $15 billion. The state paid nearly 40 percent of this expense—a massive amount for a state whose unbalanced budget and money woes have left it careening toward insolvency.

According to HealthPAC, nearly half of all personal bankruptcies in the country each year are the result of medical expenses. Medicaid—an insurance program jointly funded by federal and state governments—accounted for nearly 13 percent of all health care coverage in 2006, meaning that 13 percent of all U.S. citizens fell on or below the qualifying low-income line. Reducing any state budget intended for this entitlement program could leave many at-risk families with no option but personal bankrutpcy in the event of a medical emergency.

If you or someone you know is considering bankrutpcy, contact a dedicated Illinois bankruptcy attorney today.

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Bankruptcy / Chapter 7 Bankruptcy / Life After Bankruptcy —

Bankruptcy and Divorce

May 08 2012

It’s no secret that there’s a correlation between bankruptcy and divorce, and the question of which comes first is as rhetorical as that of the chicken and the egg. Many couples find themselves embroiled in a problematic relationship because of financial woes that lead to divorce, and, on the flip side, divorce can be so financially draining that it leads to a subsequent need for bankruptcy when all has been said and done.

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed and changed some of the formalities between bankruptcy and divorce. The most significant change was the ruling that even under a Chapter 7 bankruptcy, a person undergoing divorce could be responsible for payments decreed mandatory in a divorce filing. For example, if in a divorce decree you were ordered to pay off a joint credit card and you fail to do so, your ex-spouse can sue you for the money in question. Before the 2005 law, you could have filed bankruptcy and been exempt from this obligation.

According to The Fragile Middle Class: Americans in Debt, written in part by Elizabeth Warren, former special advisor for the Consumer Financial Protection Bureau in the Obama Administration, divorce is one of the top three reasons people file bankruptcy, alongside job loss or serious medical event. Forty percent of bankruptcies result from one of these three events.

If you or someone you know is considering filing for bankruptcy—because of divorce or any other reason—contact a dedicated Illinois bankruptcy attorney today.

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Bankruptcy / Bankruptcy Alternatives / Foreclosure —

Underwater Mortgages and You

May 04 2012

Bank of America Corp., “whose home-equity mortgage portfolio exceeds its stock market value, probably will say about $2 billion of junior loans are bad assets [in mid-April] even as some borrowers are still paying on time,” according to Bloomberg News. According to CoreLogic, nearly 25 percent of homes in the U.S. were worth less than the mortgages against them. CoreLogic also reported at the end of 2011 that more than 35 percent of the Bank of America’s primary mortgages were at least partly “underwater.” BusinessDictionary.com defines an “underwater loan” as one that has gone under its book value for one of many reasons.

An underwater mortgage is also known as a strategic default, and according to gobankingrates.com and Suze Orman, it’s not always wise to continue to pay your mortgage when it’s in this state. Orman told gobankingrates.com that “you should stick it out and continue to pay off your mortgage if your home is 10–20 percent underwater. However, if the balance on your mortgage is 20 percent greater than the value of your home or more, it isn’t worth paying off.” The theory behind this is that a homeowner with an underwater loan could rent a home for much less than a mortgage payment and save thousands of dollars being paid toward an investment that’s no longer worth it.

This does, of course, have a negative effect on one’s credit score, but Professor Brent T. White of the University of Arizona told credit.com that “the financial benefits of walking away from a severely underwater mortgage far outweigh the short-term affect on credit.”

If you are considering walking away from your mortgage or filing for bankruptcy, contact a dedicated DuPage county bankruptcy attorney today.

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Bankruptcy / Credit Cards / Life After Bankruptcy —

Ways to Pay Off Debt

May 01 2012

With harassing phone calls from creditors and a seemingly endless string of loan or mortgage denials, bankruptcy can seem the only recourse to financial insolvency. If you or someone you know is considering bankruptcy, the first step is to contact a dedicated Naperville bankruptcy attorney, but paying off debt can be accomplished eitehr before or after hiring the services of a professional. Here are some useful tips to begin paying off that mountain of debt:

Credit Card Consolidation

Credit card debt is the most common form of debt in the U.S. According to creditcards.com, the average credit card debt per household with credit card debt is $15,956. Consolidating debt payments is one easy way to manage a hefty amount of debt such as this. Choose the card with the lowest interest payment, check that the maximum limit has not been reached, and transfer any balances from a higher-interest card to this one. Keep an eye out for special bank offers extending super low interest lines of credit, and consider making a switch. Just be sure to read the fine print.

Borrow against your retirement savings or life insurance

Both retirement funds and life insurance are safety nets for the future, but if you’re in serious debt it could be worth tapping into them before the future. According to The Motely Fool, “most 401(k) plans have a feature that lets you borrow up to 50% of the account’s value.” A loan like this must be repaid within five years, and the interest will be taxed again when you withdraw money later, but easing the immediate burden might be worth it. Many life insurance plans work the same way, but be sure to pay it off as soon as possible to avoid leaving your loved ones with the same type of debt you’ve found yourself in.

Pay more than you think you can

Paying only the minimum payment on your debt balances takes the maximum amount of time to get out of debt. Try paying more than you think you can on your monthly payments by cutting a few things out of your daily budget such as treats or new clothes. “Below Your Means” is a blog with tons of ideas on how to cut things out of your daily life and a discussion board for support.

If you are facing financial insolvency, contact a Naperville bankruptcy attorney today for advice on both getting out of debt and beginning the bankruptcy process.

Image courtesy of David Castillo Dominici

Bankruptcy / Life After Bankruptcy —

Illinois Teacher Retirement System Faces Eventual Insolvency

Apr 28 2012

Amid the persisting chatter that Illinois would be a prime candidate if a law were ever passed allowing states to file bankruptcy, an editorial published in the Chicago Tribune cites one major reason for this as the state’s Teacher Retirement System (TRS), and its problematic pension funds for public employees. The editorial warns that the TRS could face insolvency in as little as 17 years. The TRS website currently states that without significant changes—including an increase in revenue—benefits will have to be reduced.

According to the TRS, there are some serious bills pending on the Illinois State Senate floor that would greatly influence pensions for public employees, not all of which are bad. One of which, sponsored by Sen. Terry Link of Lincolnshire, would allow retired TRS members to “accept full-time employment in any school district and keep their pension if the salary for that job is less than $30,000.” Another is a three-tier retirement system for all active members, which would effectively end “the current benefit structure for active teachers.”

Governor Pat Quinn and Chicago Mayor Rahm Emanuel, according to statebudgetsolutions.org, however, say, “it’s unfair that Chicago homeowners foot the bill for city teacher pensions.” According to the article, “the need to overhaul public employee pensions at the state AND local level was a dominant theme” at an early April forum where the state’s two top Democrats fielded questions.” Cutting these pensions would, of course, put the state’s retired public servants in danger of financial insolvency and possible bankruptcy. According to a TRS publication, as of June 30, 2010, “there were 170,275 active members, 104,222 inactive members entitled to but not receiving benefits in TRS, and 97,754 annuitants and beneficiaries receiving benefits.” Any legislation passed has the potential to affect these large numbers of Illinois state residents.

If you or someone you know is considering bankruptcy because of pension cuts, contact a dedicated Naperville bankruptcy attorney today.

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Bankruptcy —

Debtor’s Prison—Can You Be Locked Up for Unpaid Bills in Illinois?

Apr 24 2012

According to a January article published in the Illinois Times, “Illinois citizens worrying about paying off their debts might now have to also worry about being thrown in jail if they do not pay.” State law prohibits putting someone in jail because of his debt, though Illinois is among the six states in the union (alongside Arkansas, Arizona, Indiana, Minnesota and Washington) that allows debt collectors to seek arrest warrants for debtors in default if all other methods have failed. According to the Minnesota Star Tribune, in Illinois and southwest Indiana, “some judges jail debtors for missing court-ordered debt payments…. in January [2011] a judge sentenced a Kenney, Ill., man ‘to indefinite incarceration’ until he came up with $300 toward a lumber yard debt.”

According to a press release issued by the office of Illinois State Attorney General Lisa Madigan, the number one consumer complaint for Illinois residents in 2011 (the fourth consecutive year) was Consumer Debt. According to Chicago CBS Local, “of the nearly 5,900 debt-related complaints, more than 1,100 were filed against debt collectors who illegally threatened and harassed consumers.” Susan Hofer, spokesperson for the Illinois Department of Financial and Professional Regulations, told the Illinois Times that “her office has heard of cases where after the debtor has been arrested and taken to jail, the bond is set at the same amount as the debt that the individual owned the creditor.”

According to a 2009 article published in The New Yorker, “imprisonment for debt was abolished in New York in 1831; the rest of America soon followed.” Bankruptcy was meant to replace debtor’s prison as a way to deal with financial insolvency.”

If you or someone you know is considering bankruptcy, don’t wait until you’re behind bars to deal with it. Contact an experienced Illinois bankruptcy attorney today.

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Bankruptcy / Chapter 13 Bankruptcy —

Pink Slime Forces Beef Company to File for Chapter 11

Apr 21 2012

Beef products company AFA Foods announced in early April that it was filing for Chapter 11 bankruptcy protection after its beef filler products were referred to publically as “pink slime,” a campaign some politicians have decried as a smear campaign to the entire beef industry, according to the Chicago Tribune. The Pennsylvania-based company processes more than 500 million pounds of ground beef products each year and sells to major retail chains such as Wal-Mart, Safeway, Burger King, and Wendy’s. The term “pink slime” was coined by a “federal microbiologist who was grossed out by the product,” according to the Tribune, and refers to an industry term that is “lean, finely textured beef.” The term first appeared in a New York Times article three years ago, referring to scraps treated with ammonia hydroxide to kill pathogens.

AFA CEO Ron Allen told the Tribune that the company has struggled in the past two years due to “decreasing retail demand, costly customer demands for product testing, and growing competition from different types of meat.”

There are eight meat-processing plants in the Chicago city limits, according to the Illinois Meat Processors Association. Industry experts say that pink slime is a byproduct of nearly all meat processing plants across the country. According to the Tribune, the USDA has authorized the use of this by-product in “institutional feeding programs including school meals.”

The Illinois State House tabled an “Ag Gag” bill—dubbed so by opponents—in March of this year that would have allowed “undercover investigations in industrial animal farms,” according to the Chicago Tribune, even after neighboring Iowa successfully passed the nation’s first bill allowing such investigations. While such investigations could have led to financial difficulties for small farmers, proponents of the bill say that such a law would have discouraged the prolific use of by-products such as “pink slime.”

Large corporations such as AFA are not, of course, the only entities affected by bankruptcies. If you or someone you know—small business or not—are considering bankruptcy, contact a dedicated Chicago bankruptcy attorney today.

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