The requirements for filing a Chapter 13 bankruptcy case are as follows:

1) You must submit to credit counseling session. This is a one hour session with a credit counselor that can be done over the telephone, in person, or over the internet. The credit counselor will ask you about your income, your expenses, your assets, and your liabilities. After the end of the one hour session, you will be issued a certificate which you should provide to your attorney. Don’t rely on the credit counseling agency to provide your attorney with your certificate. Take the time to ensure your attorney has received your copy of the certificate.

2) You must provide 2 months worth of pay advices. Pay advices are proof of all sources of income such as: employment, unemployment, disability, pension, profit sharing, retirement, etc.

3) You must provide 4 years of federal tax returns. You can provide the actual return to your attorney or the transcripts can be requested directly from the Internal Revenue Service.

A bankruptcy case from filing until discharge, otherwise, from start to finish is approximately, 90 to 120 days. It is a relatively simple process from the consumer’s standpoint. The consumer provides information to his attorney who prepares the documents, acquires the required signatures, and advises the client on what steps need to be taken. For the most part, the client only has to appear before a trustee on one occasion. At that meeting, the individual has to swear under oath that the information contained in the petition and schedules are true and accurate to the best of his/her ability. The trustee’s job is to look for assets that can be taken and administered to pay off either all or a portion of the debtor’s debt. In the overwhelming majority of Chapter 7 cases, there are no assets to be administered. Thus, the person is granted a fresh start and there is nothing that goes to the creditors. That is why very few creditors, if any, will show up at the court date. Most creditors know that when they receive the Chapter 7 notice, there is not likely going to be any assets to be administered. Further, they know that there is a Chapter 7 trustee appointed by US Court to oversee the debtor’s petition and schedules. The trustee will inquire as to veracity of the debtor with regard to the information contained in the petition and schedules. Thus, there is typically one court date, 4-6 weeks after the case is filed, from start to finish, approximately 90 – 120 days, completing the case.

Chapter 13 is reorganization through a Chapter 13 trustee, provided for under Chapter 13 of the United State Bankruptcy Code. It allows for the repayment for all or a portion of one’s debt, over a 3-5 year period. So from anywhere typically between 36 to 60 months that individual will be making a monthly payment to a Chapter 13 trustee who will deal out payments each month to creditors, according to a certain hierarchy or priority. Chapter 13 is the perfect home-saver case. By that I mean, an individual can repay whatever they are behind on their mortgage, known as their mortgage arrearage, over the next 3-5 years, while making their regular 1st and if applicable, 2nd mortgage payment(s) on time once again. What happens with a lot home owners who are in foreclosure, is that they fall behind on their mortgage and the mortgage company wants one lumps sum payment to catch up. Well, homeowners don’t have that ability, but they do have the ability provided that they are back working, or they are not ill, to make a monthly payment to a trustee which will pay off that mortgage arrearage over the next 3-5 years. And while they are in this repayment plan, they are allowed to make their regular mortgage, on time, going forward. So, a Chapter 13 is most commonly used as the home-saver case. It is a great way to save a home that is in foreclosure when the mortgage company is not willing to work with the homeowner and the mortgage company is not looking to modify the loan. Chapter 13 provides sort of a modification, where you say “hey I am going to pay the regular mortgage payments on time again and I am going to pay the part where I fell behind over the next 3-5 years”. Yes, Chapter 13 is really a great home-saver case.

For Credit Counseling Information, Visit 1 Before Filing

The answer is yes, you are going to have to attend a court date. It is actually called a 341 meeting of creditors. It is a meeting required under section 341 of the bankruptcy code. It is where you appear with your attorney, you’re sworn in, and a trustee appointed by the bankruptcy court will ask a series of questions based on the documents that were filed. The trustee’s job is to determine whether or not there are any assets that can be administered and paid to creditors. In 99% of the Chapter 7 bankruptcy cases, there are no assets to be administered. The trustee makes a finding of no assets and you and your attorney walk away from the meeting, with a huge sense of relief. You get a fresh start. Now, it is not final until you receive your discharge papers, which takes another 60 – 90 days after your meeting. But, for all practical purposes, once you appear in front of the trustee and have satisfied the trustee that there are no assets to be administered you are almost home free. So, you will have to appear in court once. You may have to appear in court another time typically on a reaffirmation agreement hearing if the court wants to hear your testimony as to how you can pay for a reaffirmed debt going forward. If the court is not convinced that you can pay for the reaffirmed going forward, then the reaffirmation agreement, signed by you and the creditor will not be allowed. But, in the overall majority of cases, the judges are allowing folks to reaffirm on chosen debts. The judges also understand that with regard to vehicles, people have to get to work; they have to provide for their families. The court simply wants to make sure that the individual knows that he is going back on the hook for that debt. Back on the hook for a debt that can be eliminated. This is important because if anything should happen in the future and the auto is repossessed, the individual is on the hook for any deficiency.

When you file bankruptcy, you will have to list all the people that you owe money to. This includes family members; this includes creditors that you wanted to keep, even your American express card. I often get asked can people list utility bills on their bankruptcy, and the answer is “yes”. If you are past due on the utility bill, you want to list that in your bankruptcy. Here’s why; anything that you owe prior to filing will be eliminated. Anything that you accrued from the date of filing forward, you will owe. So you can wipe out a significant amount of past due utility bills. Now, the utility company might require that you pay a security deposit, which is typically one and half times the normal month going forward to ensure you make future payments. But, if you are behind more than that on several utility bills, it is very wise to put those in your bankruptcy and get the best fresh start you can. Remember, anything you owe on an unsecured utility debt on the date of filing and going backwards, is eliminated. Anything you accrued from the day of filing forward you are on the hook for. So, since you are only going to be filing bankruptcy this one time hopefully, get the biggest bang for the buck, get the best fresh start you can, and list those utilities. I don’t care if it’s ComEd, Nicor, the garbage or the water bill. List those utilities if you are behind and get a great fresh start going forward. Please remember to make all of your required payments, on time, going forward.

If I file for bankruptcy will my job, will my employer, will my co-workers know? The answer is “no”, typically. The employers will not find out about a bankruptcy unless I need to notify them, and that will be in the case of a garnishment that I need to stop. So in those cases, yes, the employer or the payroll department will find out about the bankruptcy since I am required to send an automatic stay to stop any kind of garnishment that is pending on a client’s paycheck. But not to worry, many people file for bankruptcy, and employers are sympathetic to this and to the fact that you’re able to file for bankruptcy to stop a garnishment. Further, employers should be happy for you and it cuts down on the administrative paperwork that they have to do in turns of garnishing. So yes, your employer may know about it, only in times when I would have to stop a garnishment. But, for the overwhelming majoring of cases, your employer is not aware of your bankruptcy filing. Your co-workers are not aware of your bankruptcy and your neighbors are not aware of your bankruptcy. Someone would have to go down to the bankruptcy court, get on a public access computer and look up your name. Now how likely is that? Why would someone waste time to do that? And anyway, it is your federal right to file. You shouldn’t feel embarrassed, you shouldn’t feel shame. Everyone finds themselves in difficult situations in sometime in their lives. That is why the federal government put in bankruptcy laws to protect people, whether it be a Chapter 7 fresh start or a Chapter 13 bill consolidation case. You have to do what is best for you and best for your family going forward. So most people will not find out about your bankruptcy filing, but in the rare cases where they do, so be it. You have to do what is best for you, and if that means filing a Chapter 7 or Chapter 13, so be it.

I have clients that see me whose drivers license’s have been suspended for several different reasons. One, is that they haven’t paid their parking tickets or they have moving violations or in some cases, they were caught driving without insurance and they were involved in a motor vehicle accident. In many of those cases, the driver license suspension will be reversed. The most common type is when someone is driving without insurance and they get into an auto accident. There are several things can happen in that case scenario: A license can be suspend unless the individual either pays off the debt, works out an installment payment plan to pay off the debt, or file for a Chapter 7 bankruptcy. Provided it was only property damage not personal injury caused by dui, the driver license suspension will be lifted and the person will be given a fresh start.
In other cases, a Chapter 13 may be filed, to repay parking tickets, which are non-dischargeable. As long as the person is repaying those debts pursuant to a Chapter 13 repayment plan, the license will be unsuspended. Now if the person fails to complete the Chapter 13 or doesn’t repay the parking tickets, the license can be re-suspended. Then again, the most common type that I see is an auto accident, property damage only without insurance. A Chapter 7 bankruptcy will eliminate the debt, and it will undo the suspension of the driver license.

If someone owes back child support, filing a Chapter 7 bankruptcy case will never eliminate child support debt? Not only is it not dischargeable, but public policy tells us, that people should take care of their children. Child support is one of those debts that the government has deemed non-dischargeable. So, although you might be able to benefit with a Chapter 7 by eliminating a lot of unsecured debt, it will only free you up to pay the debts that are non-dischargeable such as child support. In addition to child support, another non-dischargeable debt is maintenance. Maintenance is spousal support and cannot be eliminate in a bankruptcy. So take advantage of the bankruptcy laws if you are struggling and eliminate what you can. However, just know that spousal support and child support are two (2) types of debts that will not be eliminated in a Chapter 7 bankruptcy.

What follows is a typical question that I hear practically daily.
If I file for bankruptcy, can I keep my 401k, pension, profit sharing or other retirement accounts? The answer is yes, provided those items are left in their proper nature as retirement accounts. For example, if it’s in a 401k account, if the pension is labeled as such, it will be protected. The problem comes when someone takes a 401k withdrawal and moves those funds into a working account. In that case, there can be an issue as to the character of the funds. No longer is it a 401k, now it has been converted into regular savings. So long as it’s kept in its proper character, 401k, retirement benefit, pension, and profit sharing items are protected in a Chapter 7 bankruptcy.

This is on the mind with every single individual that I work with. Credit is typically what got them into the situation, however, they can’t wait to get back into it. They are eager to get back into a credit situation. My answer to them is this: Yes, you will get offers for credit again. Immediately, yes, sometimes within six (6) months, sometimes within two (2) years. There are rarely good deals going forward from the beginning. I always recommend that a client wait six (6) months to two (2) years before they start to re-establish any kind of credit. They are going to receive offers that have annual fees, high interest rates, and other little things that will cause problems. I recommend a few things: Open up a checking account and link a debit card to it. Open up a secured credit card. This is where you put $250.00 or more into a bank account, and you have $250.00 worth of charging privileges. You are charging against your own money, that is why it is called secured. Eventually, once you show good conduct, that secured card can turn into an unsecured card. Then, once you start rebuilding your credit, more reasonable offers that are better deal for you will arrive. So yes, the good news is that there is credit after bankruptcy, the bad news, is that you will get it too fast and at too high of a price. So, hang in there. Go on a cash basis, just for a little while.
There is life after bankruptcy; you will receive credit; you can purchase a car, immediately after bankruptcy, and you can qualify for a decent mortgage after two (2) years. But be careful, you don’t want to be back in my office eight (8) years after the last case. You want to be home free, never having to file bankruptcy again. That means making smart decision going forward.

Dave Siegel’s Bankruptcy Boulevard radio show, AM1690 WVON, will be airing live today, from 4-5pm at the Moo and Oink located at 4848 W. Madison Avenue, in Chicago. Guests will include Pam Morris, Amena Shari, Loren Comitor and of course, listener questions. The entire event will be filmed for later airing on WJYS, Channel 62.

The topics will include Chapter 7 bankruptcy, Chapter 13 bankruptcy, debt relief, debt education and financial counseling. Copies of the book Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy will be distributed to those in attendance.

Special thanks to Loren Comitor, Moo and Oink, and WVON for making it all possible to bring my show to the West Side. It will be an event to remember.

An interesting scenario has come up with regard to auto reaffirmation agreements. The typical situation involves the creditor submitting a reaffirmation agreement well prior to the case being discharged. In fact, the majority of reaffirmation agreements are tendered and completed at or before the 341 meeting of creditors. However, here is the interesting fact pattern. An auto creditor delays in sending the agreement for signatures. When the case closes without a valid reaffirmation agreement on file, is the debtor subject to repossession; or, is the creditor estopped from denying the ride-through in this limited fact situation. The Code does not speak to who has the burden or responsibility to tender the reaffirmation agreement. Further, the Code does not speak to who has the burden or responsibility to file said reaffirmation agreement with the Clerk of the U.S. Bankruptcy Court.