Peter Francis Geraci A Bankruptcy Blog - Chapter 7 & 13

I just finished reading “The Pale King,” David Foster Wallace’s recent novel. It was... good. Not great, merely good. It’s frustrating because the notes and addenda clearly indicate that it could’ve been something really phenomenal if Wallace hadn’t died (the circumstances of which the book avoids mentioning), but instead, it’s really just a hodgepodge of vignettes and set pieces.

“The Pale King” centers on an IRS tax return examination center in Peoria, Illinois. It’s mostly stories about some of the examiners who work there. Some are funny, some are sad, some have little lessons, some look towards kind of a theme, one is memorably creepy, Cronenberg-style. Many are dense with jargon, tax code minutiae, and finance esoterica. And that brings me to my point, which is that, for a novel substantially about government policy and regulation, “The Pale King” totally fumbles on bankruptcy.

It’s a couple (literally, a couple) terribly minor errors. Bankruptcy is referenced only twice. On page 207 of the current edition, one examiner, Chris Fogle, says his mother wound down her feminist bookstore by way of a Chapter 13. Chapter 13 is exclusively for individuals who need the ability to repay their debt at a rate they could afford. Chapter 13 can stop foreclosure and garnishment and is super-great for lots of people – but it can’t wind down a business. As Fogle’s soliloquy isn’t exactly to-the-point – if his mom did her own chapter 13, he would’ve taken half a dozen extra words to say so – I’d chalk it up to a technical error on Wallace’s part. Especially considering:

On 265, David Foster Wallace (there’s a character by that name in the book, who is not the real David Foster Wallace) notes that the IRS is leasing a building from the proprietary trustees of a corporation that “vanished into the protections of UCC Ch. 7 in the mid-1970s.” And, well, no. A corporation can file a chapter 7 bankruptcy (whether they always should is a different matter; an S-corp or an individual’s d/b/a can often just be allowed to fade into the ether) but the UCC isn’t bankruptcy and UCC chapter 7 is actually a set of proposed regulations involving warehouse receipts and bills of lading.

I’m a fan of Wallace’s fiction and in love with his nonfiction - so it sits unwell for me that he botched something I know very well. Some of the book is clearly fiction (the IRS’ Peoria location does not have an edifice designed to look like a giant form 1040) but actual legal errors bring up a whole host of questions about Wallace’s rigor, whether there are other technical errors when he discusses tax law and regulations, his copyeditor’s research, and just how finished the beloved writer’s “final novel” might have been. And maybe his characters are unreliable narrators and everything was just as he intended. And maybe I’m way too concerned over a work of fiction and should just go ahead and relax. But I really want to know.

An average American solider has more debt than the average civilian.  In honor of Memorial Day, I want to discuss (belatedly) the Service Members Civil Relief Act.  The law was put into place for soldiers to focus on defending the country and be free of financial distractions.  This law is made (especially for) military men and women who are indebted because of their service.  We want to protect our military from financial hardship and stress and using SCRA can help.  SCRA primarily will:

 

-Prevent filing of a default judgment

-Stop evictions (as long as rent is not more than $1200 per month)

-Reduce interest on debt (protected against credit with interest over 6%)

 

However, this is not a permanent solution for debt. Collections, judgments, and interest can resume after 90 days of a soldier’s discharge. So a soldier comes back from serving his/her country and after reclamation, the collection calls and lawsuits will resume.  We suspend the stress caused by debt – but after discharge, a soldier loses his/her SCRA protection.

 

The only debt protected by SCRA is debt incurred before active duty. To use SCRA for the benefits, a soldier must show service have a “material effect” on the cause of the judgment. SCRA also does not happen automatically. A soldier should send a copy of the mobilization orders to the creditors before being deployed. While SCRA helps soldiers, it can be considered a Band-Aid for a possible debt wound.

 

The long term solution is a bankruptcy. After the 90-day grace period, a veteran can find themselves with creditor calls and possible lawsuits. The way to stop the lawsuits and judgments is a filed bankruptcy. Eliminating all debt with a Chapter 7 or consolidating in a Chapter 13 repayment plan is the way to permanently relieve the stress of our veterans.  While in active duty, interest on debt (again incurred before duty) is reduced, but after the 90 days, interest will start again.

 

Bankruptcy is the best way to be debt free.  It doesn’t matter if you are a civilian or a soldier, bankruptcy law is there to protect you for the long run – not until you are discharged from active duty.

Rain, rain, go away. The rain in the Midwest never seems to stop. Like the bad weather, debt never seems to stop. Unless you win the lottery, your debt is not going anywhere, anytime soon. Debt hangs over your head like a black cloud ruining a sunny day. Minimum payments do not decrease a large balance and settling the debt could land you with a 1099 IRS form.

 

I have spoken to enough people to understand no one plans on being in debt. Something happens – whether a medical calamity, divorce, loss of job, etc. where someone is not able to move financially move forward.  Options like debt consolidation work the same as holding a newspaper over your head in a downpour. The newspaper eventually rips and you get soaked – or sued by a creditor.

 

Debt freedom does not happen overnight.  Your case can be filed in as little as one day – with Geraci Law, LLC – and for the next 60-90 days you and your attorneys are waiting out the creditor storm for your discharge from the bankruptcy court. If you have a big debt balance, filing a bankruptcy is like finding shelter from a thunderstorm. A Geraci attorney will help you get some relief and feel ease.  With the economy in shambles and gas prices increasing another $0.30, everyone needs some help.

 

Bankruptcy is a great solution if you are being followed by a financial storm cloud. The creditor calls and the constant headaches can make any situation seem like a rainy day. Discharging your debt could be the best thing you do – instead of worrying about how you are going to stay current with credit cards and put food on the table, you could worry about…nothing but finding the pesky lost umbrella.

 

 

The worst part of the bankruptcy process is making the initial phone call. It’s inevitable –no one wants to file a bankruptcy and I do not think many people know enough about the benefits of bankruptcy to consider it an option. Bills are easy to ignore. No one wants to go to the mailbox to find collection letters and notices and if you have multiple creditors, the amount of bills can quickly become overwhelming and the idea of bankruptcy can become frightening.

 

Once you start opening the mail and bring out the calculator to add up your total debt, most people will try to call creditors to work out a payment plan.  The problem is, some creditors will refuse to work with you, most creditors will propose an unfeasible payment plan, and others will close your account, lower your credit limit and demand the balance in full. If you have ever tried to call your creditors, you understand talking to multiple “representatives” and feeling like nothing has been resolved. That is not very reassuring to someone calling for help.

 

After a failed attempt at working with creditors, many people try alternatives to get a handle on the debt.  Debtors seek out debt consolidation, credit counseling, or borrowing from retirement. Each option takes time.  Debt consolidation has no set time limit – you could very well be in a repayment plan for 10 years while paying interest, a payment to the debt consolidator and your monthly bills. A Chapter 7 bankruptcy on the other hand could be done (and you could be debt free) in as little as 3-4 months.

 

The majority of people who go through the agony of debt consolidation eventually seek bankruptcy relief. If you have more debt than income, if you can’t sleep at night because of worries about debt and if you are afraid to answer your phone – consider bankruptcy. It’s a sigh of relief when you hear the words, “we can help.”

 

What will a bankruptcy do to my credit? The most redundant question asked by potential bankruptcy filers. The simplest, straight-forward answer is you don’t have good credit now! 

 

When it comes down to it – there are two major reasons you call a bankruptcy attorney. Number one, you received a lawsuit summons or collectors are calling like crazy.  This means you have not made a payment in some time; your creditor tried contacting you directly and failed so sold the account to a collection agency.  The collection agency tried contacting you directly and failed and hired an attorney to sue you for the balance to try to recoup some of the cost from purchasing the account.  The biggest contributor to your credit score is timely payments – not only did you not make timely payments to your original creditor but the collection agency adds so many late fees there is no way for you to get caught up.

 

Solution – you file a bankruptcy. You eliminate the poor credit history and at least you have an opportunity to rebuild. In phonebook ads, organizations offer credit cleanup for a substantial fee. Realistically, there is nothing they can do.  The only way to eliminate something from your credit report is to dispute it (and win the dispute) and if you ignored the collection calls, you really don’t have a leg to stand on.  Post-bankruptcy you stay current with your car note, mortgage payment, student loan payment, etc. you can reestablish your credit with timely payments.

 

Second major reason – you have made payments on time but your credit cards are maxed out and you just found out about a loss of income.  Whether your hours and overtime are going to be cut or if your monthly expenses increased and your fixed income cannot cover the costs and minimum payments, you call a bankruptcy attorney because in the foreseeable future you will not be able to stay current. 

 

Again, you do not have good credit. In actuality, you have too much credit.  Another major factor when applying for financing is your debt to income ratio.  If you have $60,000 in credit card debt and are making $35,000 per year, you will never pay off the debt.  Even if you do, you will be paying significantly more in interest than anything else. A financer will see the current payments but will also consider you have a tremendous amount of debt and a significant portion of your paycheck is going to minimum payments (well realistically to interest).

 

Solution – you file a bankruptcy.  Post-bankruptcy, you have no debt! All you have is income! Again, you make your payments on time and put money into a savings account and you will be fine.  Bankruptcy is one of the country’s oldest laws and people have been able to “reestablish credit” for centuries.  

 

Bankruptcy is like Game 7 of the Stanley Cup Playoffs.  You can win and move on with a fresh start to erase the losses or you can go home still in debt – ashamed of the fact you can’t get a puck past Roberto Luongo.

At some point, everyone will apply for a loan.  When you apply for a loan it is important to look at the terms, the APR and actually read the contract.  If the lender tells you a co-signer is required for the loan, then it’s time to walk away.  I know the new car is pretty but think about the long term repercussions if you cannot afford a loan on your own. Co-signing a debt for someone can be a dangerous undertaking.  You are asking someone to pay for the debt or loan if you are unable to.  If a co-signer is required to get the loan, you should look at your loan application to see what you can improve.

 

The amount of debt you are in compared to your income can affect your ability to get a loan.  If you have more debt than your annual income, your loan servicer is taking on a risk by giving you more credit. Filing a Chapter 7 bankruptcy would eliminate the other debt allowing you to rebuild your credit to qualify for a better loan.

 

Another factor is timely payments.  A big contributor to your credit score is payment history.  Missed payments are a sign of your ability to pay creditors – if you have a poor payment history, a potential lender may require a co-signer to ensure payments will be made.   You can get a free annual credit report from our Web site, www.infotapes.com, and look at it. If you have more debt than you can handle, consider a bankruptcy. In the long term, you will probably have a better loan than you would right now and possibly better relationships with your potential co-signers.

 

If someone asks you to co-sign on a loan, say NO! It is becoming more and more common parents of adult children file a bankruptcy because of the additional financial burden.  Even if you trust the person, things happen. Many people do not plan on losing jobs or defaulting on loans but it happens everyday. If you are a co-signer for someone with bad luck, you are just as responsible for the debt as they are. Often, a car will be repossessed (for example) and if the person you co-sign for is out of work, the creditor will come after you and your wages. 

 

When applying for a loan, the servicer will look at the amount of your down payment. The recommended amount is 20 percent. If you try to increase the size of your down payment there is less of a loan to finance.  A co-signer attaches themselves to your financial future – you are asking them to pay the debt if you do not. Instead of co-signing, ask your friend or family member if they will gift you money for your down payment if they love you that much. You friend or family could give you the money and protect themselves from possible financial hardship.

 

Ultimately you are probably helping your family member or friend by refusing to co-sign for a debt. You are telling the person to get a handle on their financial situation – whether by filing a bankruptcy or finding a better loan provider.

  

It’s getting close to wedding season when people like me trek back and forth to Bed, Bath and Beyond every other weekend.  I get the love stuff – like replacing I with we and how she’s met the man of her dreams but what about the financial repercussions? Marriage is a binding contract between two people to join their lives and their financial futures.  How does one person with zero debt and “perfect” credit fuse finances with another person with $50,000 in debt? The answer can be found in bankruptcy.

 

Now, depending on your state, assets and financial decisions of one spouse do not necessarily affect the other. Illinois, for example, is not a community property state but Wisconsin is. Community property related to bankruptcy means any debt that occurred while you were/are married can be either spouse’s responsibility.  If you have no debt but your spouse abuses the credit cards, all of sudden your good credit is tying the knot with your spouse’s debt.

 

Boy meets girl. Boy falls in love. Girl maxes out her credit cards.  Before the boy proposes, there should be a serious discussion about a bankruptcy. If the girl files and eliminates all of her debt, the boy and girl can enjoy debt-free marital bliss. A chapter 7 bankruptcy can eliminate all the old bad debt and provides an opportunity to rebuild credit as a couple.

 

So what if you and your betrothed both have debt? You could file separately before the wedding but instead of paying one attorney fee you would be paying two. Instead wait until after the wedding so you are able to file a joint bankruptcy and again, enjoy debt freedom as newlyweds. You could register for a family member to pay your attorney fees.  It’s a great bargain – financial freedom as a gift for you and your soon-to-be spouse.

                                                                            

- Despite technical problems, Geraci attorneys get the job done. A client came into our office and the client's car was going to be auctioned 3 days later and the Geraci attorney filed the case in ONE day and saved the client's vehicle!

- A client arrived at the 341 Meeting of Creditors without a cell phone and forgot to arrange a ride. The Geraci attorney representing the client lent their cell phone and waited until their ride picked them up.

- At the 341 Meeting of Creditors, the client was worried about their own case while listening to errors made by a different law firm for another case. The Geraci attorney sat down and explained the mistakes by the other attorney and took the time to explain what would happen at their own meeting to reaffirm the client hired the right place.

When you hear the word bankruptcy – the negatives, the misconceptions immediately come to the forefront to define the word. The word bankruptcy has been dragged through the mud almost to the point of no return. It’s so unfortunate considering bankruptcy has helped so many people for hundreds of years become debt free. A big misconception is the public thinks there is only one type of bankruptcy. A chapter 7 liquidates debt and immediately the public assumes a debtor would lose their house, cars, and other assets. However there are actually 6 different chapters of bankruptcy outlined in title 11. There are two consumer bankruptcies – a chapter 7 and a chapter 13 and below I have outlined the other chapters of bankruptcy for your reading pleasures.

Chapter 9

A chapter 9 bankruptcy is available only to municipalities. A chapter 9 is reorganization not an elimination of debt. Chapters 9s are rarely filed and the most used example is the 1994 filing of Orange County, California involving millions in municipal debts.

Chapter 11

A chapter 11 bankruptcy is for businesses or individuals with more debt than chapter 13 debt limitations allow. Under a chapter 7 bankruptcy, a business will generally stop operations – chapter 11 bankruptcies will allow the business to continue to operate while continuing bankruptcy proceedings.

Chapter 12

Until 1986, there was not a bankruptcy code directed toward farmers. A chapter 12 bankruptcy allows family farmers and family fisherman to propose and follow through with a plan to repay all or part of their debts. Chapter 12 bankruptcies are far less complicated and generally cheaper than chapter 11s and allows for more debt than a chapter 13 repayment plan. There are qualifications outlined in the bankruptcy code for debtors to call themselves family farmers and fisherman including more than ½ of the outstanding stock or equity must be owned by one family and its relatives and if the corporation has stock it cannot be publicly traded.

Chapter 15

A chapter 15 was added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This section deals with jurisdiction and is often used as a supplement for corporate bankruptcies with holdings in other countries.

We hear it all over the place: “Be smart with your spending.” But how does that apply to charitable giving?

Many people who are filing a bankruptcy often deal with this dilemma. They are confronted with a choice: give to the needy, or keep what’s needed to pay the insurance/day care/prescriptions. While giving money to charity may be a moral obligation and/or gratification to you, you must consider it as one of your monthly expenses and budget your donations appropriately. $10 every week at church could mean a year’s worth of electricity, or $50 per paycheck could be the difference between your car in the garage or in the “repo” lot. A lot of the time, people struggling with their finances simply don’t have someone to tell them that it’s better, for the time being, to save their monetary contributions at least until they have their feet back on the ground. Well, I’m here to tell you now that if you need it, you’ve got to keep it.

The more you give does not make you a better person. Remember that saying, “it’s the thought that counts”? It didn’t just apply that one time you burned the casserole at Thanksgiving. The greatest acts of charity don’t start and end with a checkbook; if you’ve got the heart and the time, you can positively impact your community (and beyond) through volunteer work virtually anywhere. These acts of kindness can say a lot more than just “here you go” from Abraham Lincoln, Andrew Jackson, or even Benjamin Franklin. If you believe in karma, you’ll have a lot more coming back to you, and the return on investment is immediate.

At least for now, instead of giving away your much-needed dollars, spend a little time giving back to your community. You’ll never know how much fulfillment it’ll give you until you try it.

Happy St. Patrick’s Day! Today, everyone has a little bit of Irish heritage and will chase the clever Leprechaun to find fortune. Bankruptcy is a debtor’s pot o’ gold. Getting rid of bills and eliminating the pain-staking minimum payments every month is like finding the end of the rainbow. All of a sudden, the $700 per month you are spending on credit card payments can go toward a new green shirt or an ice-cold Guinness. Today, enjoy the warm weather and consider a bankruptcy attorney your lucky charm.

Increases in taxes, expenses and minimums, increases in taxes, expenses and minimums – oh my! Like the mysterious world of Oz, the current financial situation of the average debtor seems to be as confusing as to why Dorothy wore red glittery shoes in windblown Kansas. Like the veil being pulled off the wonderful wizard of Oz, the sheath of financial naiveté needs to be yanked off.

There are vague percentages about increases and decreases being tossed around in various newspapers addressing how the economy is bouncing back. Maybe, but it seems like the rich are getting richer and the middle class are joining the poor. Pardon my criticism but how is the economy bouncing back when the Illinois legislature approved a 66% income tax increase? A percentage of the population may be returning to work, but paychecks are being spent on taxes, increased living expenses, and unbelievable interest rates and minimum payments.

Income taxes went up 66 percent in Illinois to attempt to balance the state budget. The average median income for a single person in Illinois is $46,355. Currently, this single person is paying $1,330.65 in income taxes. With the income tax increase, the person will now pay $2,222.19 in income taxes. That is $891.54 more! If you have a tight budget as is, the bigger deduction from your check is not going to help anything. For your average single working person, the economy is not good – especially if you have debt.

Think about it, if you are paying a $500 minimum payment toward your credit card every month, the tax increase eats up your minimum payment and then some. Filing a bankruptcy does not mean the tax hike will disappear but at least you’ll be debt free to rebudget and afford things like food, water and gas.

Living expenses continue to increase particularly gas prices. You need gas to fuel the car to get to work but you have to pick up extra shifts to be able to afford the gas. According to a survey, the average distance for a commuter in Illinois is 16 miles and when gas prices are expected to climb up to $4.00+ by summer, gas for a 32 mile round-trip add up. Jobs may be available (according to ads in the Chicago Tribune) but a person returning to work has to pay to get there. There is no money left over to pay minimum payments after fueling up.

Lions and tigers and minimums – oh my! When you have a significant amount of debt, making minimum payments on $10,000 worth of debt is really not going to get you anywhere. The minimum payments go primarily to interest not to the principal. If you struggling to make the minimum, an increase in interest or the payment itself can throw an already tight budget out of whack. File a Chapter 7 bankruptcy to eliminate the debt or a Chapter 13 which will eliminate interest.

For example, a statement provided by an Illinois debtor for a payday loan store showed an original loan amount of $6,065.00. This loan had an APR of 300% and the debtor will pay a total of $9,105.79 by the end of the loan. This person should file a bankruptcy and feel free to dance down the sidewalk singing, “ding dong the witch is dead.”

Follow the yellow brick road to financial freedom. Take some time and actually look at your credit card statements and see how your payment is broken up. If you are an Illinois resident visit this site to calculate how much the tax increase will affect your monthly budget. As for now, the economy doesn’t seem to be getting much better. Click your heels together and investigate your bankruptcy options.

For years, Michael Scott and his office clan have entertained millions of Americans on the hit NBC mockumentary series, “The Office.” Its popularity is due, in large part, to the old comedy trick that the audience knows something that the characters don’t. In the case of “The Office,” the television audience is aware that the events on the show are fictitious, and can therefore find humor through satire. However, in the fourth season episode “Money,” the show completely misleads its viewers about the life-saving system of bankruptcy, and actually leads them to believe that it’s a procedure to be avoided. So, where’s the comedy when it’s the audience that’s been tricked?

“I…DECLARE…BANKRUPTCY!” Haha, very funny, Michael Scott. We all know that that’s not how it works. The audience does realize that Michael’s excessive spending and poor budgeting has led him to reevaluate his lifestyle (like, not buying magic kits or bass fishing equipment), but in our real world, the audience probably understands just about as much about bankruptcy as he does. Michael believes and even states, “In Monopoly, you go bankrupt, you lose.” Well, that is true, but Monopoly is also a 1930s-era board game and this is real life: in this world, you go bankrupt, you get another chance at financial freedom.

After Michael literally declares the word bankruptcy, one of the office accountants decides to look over his budget and offer some professional advice. This is where experienced accountants, attorneys, and burned debtors know that “The Office” is doling out some pretty bad advice. Michael is advised to meet with a debt consolidator by Oscar Nuñez, the office accountant – red flag! Wrong! An educated accountant would know that debt consolidation is really a scam: first of all, it rarely works, and second, the program tricks clueless debtors into extending the terms of their repayment (which is why interest is lowered). I don’t know about anyone else, but I’d like to see what university gave Oscar Nuñez a degree in accounting!

So, who is responsible for giving millions of Americans bad advice? Is it the producers, the writers, maybe even the network? It looks like that adage “Don’t believe everything you see on T.V.” remains true to this day. It’s really up to the American people to make themselves aware of the subjects presented on television, especially regarding finance and debt. Don’t be like Michael Scott – consult real bankruptcy attorneys, like those at Geraci Law, LLC. They’ll give you the kind of advice NBC didn’t – good advice!

It will be close to 50 degrees in the Chicago area today and it's a glimmer of hope - spring is on its way.  The warm weather means people emerge from hibernation and spend time outside. In Chicago, the path along Lake Shore Drive fills with joggers, bikers, rollerbladers and the general passerbys. Spring turns into summer and instead of fidgeting with bills, lawsuit summons, and the endless stream of creditor calls, I would rather join the careless joggers on Lake Shore Drive. Spring clean your debt just like you spring clean the dreaded hall closet.

Filing a bankruptcy is the ultimate spring cleaning. Think about it, you file a Chapter 7 bankruptcy now - wait the 60-90 days for your discharge and you could be debt-free by June! It's a big decision to make but when you actually look at your bills, your budget and your income - what else are you going to do? You can waste another wonderful spring day doing balance transfers or barely meeting minimum payments or you can contact a bankruptcy attorney and get out of debt.

I understand a person is not going to be convinced to file a bankruptcy overnight. It actually takes the average family 2 years of fighting creditors to actually make the decision to file a bankruptcy. But look at the numbers, why torment yourself for the next 30+ years when you could file a bankruptcy and actually enjoy some relief (and a sunny afternoon). Plug your numbers in to Bankrate if you want to see how much you are actually spending on minimum payments.

Get yourself out of debt. Throw away the stress and hassle like you throw away old dusty brooms from the hall closet.

People who file for Chapter 7 and Chapter 13 bankruptcies are relieved to find out that the majority of their household goods and personal property can be protected by exemptions (that vary depending on each state). That means you won’t need to expect the trustee to march into your home, have some breakfast, and walk out with your blender and DVD collection. But what worry a lot of filers are those “priceless” bands they wear around their fingers. Those are exempt…or are they? The short answer is no, there is no automatic exemption for sentimental value. However, there are ways to determine and even protect valuable assets like engagement and wedding rings.

Here’s a question: “Can I just pretend I don’t have any?” Now ask yourself this: would you swear to this lie in front of a judge, knowing it can land you in an even bigger mess? Remember that bankruptcy is a solution only for honest people. It’s both smart and constitutional to be up front about your assets so that we at Geraci Law can help you. Let your attorney know your concerns. He or she will probably recommend one of two things: one, get a low, trade-in valuation at a place like a pawn shop. You may be shocked to find that wedding and engagement rings won’t bring in more than several hundred dollars. Don’t take it as an insult, however; the lower the value, the easier it will be to protect your priceless asset. If it turns out that your jewelry is worth more than what our exemptions can protect, you may be able to “buy out” the equity of the rings from the trustee. And if all else fails, you can always file a Chapter 13 bankruptcy to save your assets.

A final suggestion: don’t wear anything excessively sparkly or obviously expensive to your meeting of creditors. It is not unheard of for the trustee to demand those assets right then and there! A bankruptcy court hearing isn’t Studio 54 or the opera: it certainly is not the place to show off what you have when you’re convincing people you can’t pay your debt.

“I love romantic walks on the beach, bubble baths, and losing sleep over my $10,000 in credit card debt!” …not a likely response you’ll hear on The Dating Game, is it? According to a 2009 survey issued by Credit Card Statistics, people are more likely to discuss classically taboo topics like their weight and political views before they admit to how much they owe. Those recognized off-limits topics hold the same possible consequence as debt: rejection. So, why is it that Bachelor #1 would rather dish the saga of his man gut or his political crush before ever admitting that he – like most Americans – gets the occasional call from a bill collector?

For one, debt is hardly something to brag about. Even saying that you’re paying down a debt sets off the red flag that you owe at least one creditor money; do you think your date wants to stick around to find out how many more you owe? The fact alone that people are keeping this dirty little secret hidden under the rug indicates they’re not only ashamed of it, but they’re scared of it. And yes – debt is scary. It means constant harassment from creditors, lawsuits, garnishments, foreclosures…the future is long and grim when you’re buried with debt. Unlike weight and political association, which fluctuate by the day, debt either goes down at a snail’s pace or grows quietly and ominously like a tumor. “So, can I call you later?” No, thank you.

Fortunately, there is a way to clear one’s debt faster than it took President Bush to leave office, and definitely more efficiently than a liquid-only diet. For those who qualify for a Chapter 7 bankruptcy, they can go from debt-stressing to debt-free in as little as four months. With a Chapter 13 bankruptcy, people start seeing their debt drop consistently every month – beat that, Biggest Loser! Before you know it, your debt will be the last of your problems and then the only numbers you’ll be paying attention to will be the ones on your phone, and not on your credit report.

One in four people do it…Facebook stalking, that is. Over 500 million people actively use Facebook today. They’re checking out photos of family vacations, commenting about their friend’s beautiful new Corvette, even doing a little updating of their own. Since 2004, the world’s population has been at your fingertips…and at your debt collectors’, too.

Facebook is a debt collector’s dream: not only is it free, it can potentially give them unlimited access to personal information like your job, family contacts, hobbies, recent purchases, vacations…are you scared yet? These days, your debt collectors don’t have to be secret agents to uncover evidence against you and legally force you to pay your debts.

What you can do to protect yourself? First of all, know your privacy settings and adjust them to the highest levels. Second, be careful whose “friendship” you accept. You may see a good-looking person with a conventional name from your old school and assume you once knew them. Don’t be fooled! That may very well be Joe Creditor, the scum-sucking collector terrorizing your home phone and family members. Lastly, it’d be smart to go through all of your photos, status updates, and personal information so as not to reveal anything you wouldn’t want your debt collectors to know…

Start considering your debt collectors as dangerous and ruthless as identity thieves – they’ll go anywhere and do anything to get your money. Debt collectors are not your friends – especially not on Facebook.

You file a bankruptcy, your debt is eliminated and now what? Being debt-free is a great thing and you want to rebuild your credit but maybe you don't know how? Post-bankruptcy brings credit cards and financing options but with higher interest rates. Creditors want you to be in debt - if you apply for one of these credit cards and get overwhelmed again, the safety net of a Chapter 7 bankruptcy is not an option again for eight years.  It is easier said then done to create a budget and save money. Many people are not educated in handling finances and bankruptcy can eliminate the old debt but to manage future debt they need the tools to succeed.

When the bankruptcy laws changed in 2005, certification of credit counseling and debt management became mandatory for a case to filed and a case to be discharged. The debtor is required to spend time learning financial management to receive his certification. The credit counseling course focuses on reasons a person gets into debt and possible solutions. So, a person filing for a bankruptcy completes the course and can identify possible reasons as to how they got into debt in the first place. The debtor education course outlines short term and long term goals along with creating a budget so post-bankruptcy, the debtor has background in financial management.

The courses are important. The majority of bankruptcies are filed due to factors like divorce and medical problems.  But, there are people who used credit and were possibly not educated in the ramifications of missed payments, high interest, etc. For a person who is overwhelmed by their debt, these courses can provide the tools for a better financial future.

When you’re stuck in debt, your life is stressful enough as it is without balancing the angel and devil on your shoulder (let alone your checkbook). A lot of people take the debt they’ve acquired very hard on themselves and many wonder, “is it better for me to live under the weight of my mistakes if it’s what I deserve?” The answer, for hundreds of years, is: no. No one – not your family, your government, your religion – can force this weight on you forever. And, if you’re an honest, hard working, out of luck American, then bankruptcy is not stealing; it’s saving you.

Let’s examine the definition of the world “steal.” Scary word, isn’t it? A universal definition goes, “To take (the property of another) without right or permission.” When somebody has to file for bankruptcy, nine times out of ten, it’s for a debt they were approved for. You can’t walk into a bank or a store and apply for their credit card without getting approved, after all. If your intention was always to pay it back, then filing bankruptcy on that loan is certainly not stealing. Stealing, simply said, is illegal. Even a simple shoplifting charge can land anybody in jail for up to a year! Bankruptcy, on the other hand, is a perfectly legal process based off of the ideals of our founding fathers: a chance for a fresh start for honest people who want a better life.

So, if “Thou Shalt Not Steal” is keeping you up at night, keep in mind that even the Old Testament approves of debt elimination (Deuteronomy 15: 1-2). You’re living in the 21st century, and life isn’t much longer now than it was then. Don’t spend it eating away at your conscience while your debts acquire interest. Bankruptcy is your golden, legal answer: time-tested, shoulder angel approved.

The idea of filing for bankruptcy is a scary one for most people. So, when you have made the decision to file for bankruptcy protection, you want to be certain you find the right firm to help you. Not all bankruptcy lawyers and law firms are the same, and having an experienced bankruptcy lawyer is a huge benefit.

Attorneys with a larger number of bankruptcy filings are usually more familiar with the different types of bankruptcy, and the various issues that can arise in a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. They are more familiar with the bankruptcy trustees and the procedures used in the local US Bankruptcy Court. More experienced attorneys can answer your bankruptcy questions, go over your bankruptcy alternatives, and ensure you receive the bankruptcy help you are requesting. Having a less experienced law firm file your bankruptcy could lead to loss of property in a Chapter 7, or a dismissal of your Chapter 13.

Peter Francis Geraci and his law firm Geraci Law L.L.C. have been representing debtors in consumer bankruptcy (personal bankruptcy) for almost 35 years. The experienced attorneys are familiar with all aspects of the new bankruptcy laws and can ensure the best result for you in your time of financial distress. Filing bankruptcy is such an important decision. Make sure you have the right people helping you.

Will it ruin my credit?

- You probably don’t have great credit now! Filing a bankruptcy can eliminate your debt and provide you with the opportunity to rebuild your credit. Even if you have a 700+ credit score, having too much credit is not good credit.

 

Will I lose my house?

- Not if you don’t want to. To keep your house, you must stay current with your mortgage payments. The attorney you meet with will determine which bankruptcy will allow you to keep your home. Geraci Law has not lost a house in over 35 years and doesn't want to start with yours.

 

Do I have to include all of my credit cards?

- You cannot pick and choose your debt and why would you want to? Filing a bankruptcy can eliminate all of your debt giving you an opportunity for a fresh start.   

 

Can I keep my boat/motorcycle/rocket ship?

- You can keep your assets if you can afford to keep them. The attorney you meet with will determine which bankruptcy will protect all of your assets.

 

Do I have to be behind on my bills to file for bankruptcy?

 

- No! You can be up to date with the minimum payments and still have a tremendous amount of debt. Making the minimum payments is probably not getting your anywhere close to being debt free. For example, if you have $2,500 in credit card debt with 21% APR and you are only making the minimum payment – it will take you 40 years and 8 months to pay back the original charge of $2,500!

 

How much is it going to cost?

- Going and meeting with an attorney is like going to the doctor. A lawyer like a doctor needs to diagnose what the problem is and assess the amount of work to be done to fix the problem. After filling out our forms and meeting with a lawyer, your fee will be quoted to you. Our fees can be done in payment plans and will be based on your case and your financial situation.

 

I talk to people all day, every day. People who by overspending, medical issues, divorce, etc. have found themselves in a hole they can't dig themselves out of.  Knowing they are in fact "buried" there is still hesitation to filing a bankruptcy. Somehow, bankruptcy has been dubbed the end all, be all to your financial future. The somehow could be answered with the boisterous words of people like Sue Orman. In an interview with "Us Money Talk" she said bankruptcy is the worst choice to make and it will have a negative impact on a credit score. Obviously, Ms. Orman! Applying for too much credit, multiple inquires into a person's credit, debt settlement and missed payments can also have a negative impact. 

Orman's brilliant solution is creating a budget with a credit counseling agency. Sure, credit counseling with a non-profit, legitimate agency can help people budget and plan for their future. BUT - how does it help when you have $50,000 in credit card with 30% APR. There's a negative impact on a budget, if a person can't meet the minimum payments due to a job loss, income reduction, etc. how will budgeting with a loss of income help plan for their financial future. 

A person with $50,000 in credit card debt at 30% APR is looking at a minimum payment of $1,725.00 per month and it will take the person 525 months to pay off the debt! That's over 43 years and the person will pay $124,263.52 in interest! Instead the person files a Chapter 7 bankruptcy, eliminates the debt and the money spent on minimum payments is allocated to their financial future. If a person is so overwhelmed by their debt, with interest rates and minimum payments skyrocketing, debt settlement and budget planning are a Band Aid for a massive debt wound.

Orman and others like her ignore the real numbers and consider one of the country's oldest laws the worst option for struggling people. Why spend thousands upon thousands of dollars in interest, lose sleepless nights from stress and still have Orman's "negative impact" on your credit when you can file a bankruptcy and be debt free!

Peter Francis Geraci Answers Your Debt Questions

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What is really surprising is that only 1 of 100 people who should file bankruptcy, actually do! Example: You get a foreclosure notice. Instead of filng Chapter 7 or Chapter 13, to get rid of credit cards and other debt, so you can afford your mortgage, you just keep on paying your credit cards, and worse yet, abandon your home. Another example: You get sued by a creditor for $3,000 money you owe, for an uninsured accident, or credit cards, or medical bills. Instead of taking care of it and either eliminating it in Chapter 7, or getting a low payment you can afford for all bills in Chapter 13, you do nothing, your drivers' license gets suspended, your checking account is subject to garnishment, and so are your wages. Both are sad. Creditors are so so happy when you do nothing.

I saw Dave Ramsey, the guru of non-professional advice on getting of debt, with a show entitled "How to avoid bankruptcy". It is striking how horrible his advice is. For a guy who filed bankruptcy himself, got a fresh start, and went on to become a multi-millionaire, you have to wonder who is behind his "Avoid Bankruptcy" campaign. A nice lady called in with a big problem. She is married with 3 kids, and their household income is $3600 a month net. Her mortgage, utilties, food and other living expenses are over $3000 a month and they have no savings. She has $50,000.00 in credit cards and is paying minimum payments of $3000 a month, and has to use them again to buy food, clothes and gas. So she will never get out of debt unless she files bankruptcy. What is Dave Ramsey's bogus advice? Stop paying the credit cards, and when they call her, hang up on them unless they will settle each debt for cash! And he told her to stop contributing to her 401K! Unbelievable! Why? Let's say she has a card with $8000 balance. How is she going to get $4000 to give them? She only has about $500 a month she can squeeze out. It would take her 8 months to save $4000.00. And if they did settle for 50%, they would send her a 1099 for the $4000 they forgave, which she would have to pay taxes on. Debt forgiven is taxable! Of course Dave Ramsey didn't say that. And in the meantime, the other $42,000 in creditors aren't going to wait 8 months. They will call her and her husband at home and work, sue her, get a judgment, and each judgment will attach to her house. Not only that, they can garnish their wages, and her bank account. So Dave Ramsey's advice is so totally wrong as to raise serious questions as to how Fox News lets him broadcast such nonsense. Of course, Dave won't make his millions if folks like this family file bankruptcy and keep their house car and pension, and get out of debt, since they won't have to worry about bills, and won't have to listen to him. Dave is not a bankruptcy attorney, he can't give legal advice, and what advice he gives is weird. These folks can file Chapter 7 for less than $2000, have no debt, keep their house car and pension, be free from all credit harassment, and THERE IS NO TAX DUE ON DEBT FORGIVEN IN BANKRUPTCY! Shame on you Dave Ramsey for telling this lady to stiff her creditors, give her pension contribution to them, and be afraid of bankruptcy. President Obama is a trained Harvard lawyer and told GM to file bankruptcy to survive. Why is Dave Ramsey spreading fear of bankruptcy relief?

The word "bankruptcy" is often misused.  It has the common meaning of something wrong or immoral.  That is not true.  Bankruptcy is a very moral law that puts you on an even footing with people who have gotten you into debt by lending you money at interest.  It does not give you any unfair advantage. No one plans to get into debt so that they can do a bankruptcy.  Bankruptcy is simply a safety valve, so that people who cannot pay their debt without hardship have a way out

If there were no bankruptcy laws, you would have to live with your debt forever.  In most countries, that is what happens.  The custom in Ethiopia is to chain the creditor and the borrower together, and let them work it out. I guess the idea is that they got each other into it, and it is up to them to get each other out of the situation!  A client from Chile came into my office, and told me that in Chile, if you owe someone money, the rich person you owe simply gets the police or the military to come to your house and rob you of everything, or perhaps murder you.  In the United States, it does not work like that.  We have the best laws in the world. 

Bankruptcy gets rid of bills. It is like a divorce from your credit cards.  It is that simple.  You can either discharge your debt immediately under Chapter 7 of the Federal Bankruptcy Code, or you can reorganize your debt, and pay it in lower installments over as long as 60 months, under Chapter 13 of the Code.  These two "Chapters" are the ones that refer to individuals.  Other "Chapters" are for corporations, farmers and railroads.  Since I only represent individuals, the other Chapters are not dealt with in this book.

Bankruptcy is not the end.  It is the beginning.  A "Discharge" is issued after a judge has examined your situation.  This means that all debts, which are not "exceptions" from discharge, are gone.  Who pays them?  No one.  When most creditors lend money, they figure their rate of interest high enough so that any losses from bankruptcy are covered.  By the way, only part of creditors' losses are for bankruptcy.  The big lenders lose far more to fraud, to theft, and to people who never have enough integrity to deal with the situation honestly, and just disappear or hide from the creditors.

Bankruptcy is only for honest people.  If you are a crook, if you are "working under the table", or if you are hiding assets, or don't want to tell the truth, do not go anywhere near a bankruptcy lawyer.  I will not take your case.  I deal only with honest people who have too much debt to repay.  The bankruptcy laws were not written for tax evaders and con artists.  There are very severe penalties for lying on your bankruptcy petition, a copy of your bankruptcy goes to the IRS automatically, and debts incurred by fraud or deception are not dischargeable.

So, contrary to what you might have been told by your bartender, or by someone who knows nothing about it, bankruptcy is an honest law for honest people, passed by the United States Congress to give honest people a way out of debt.

 

The main causes are loss of jobs, illness, and bad luck.  Other causes are:  using credit cards for regular living expenses, and not paying them off in full every month; car accidents; getting ripped off by used car dealers; co-signing for unreliable people; and divorce.

Let's talk about each of these causes briefly.

Loss of job

If you lose your job, and qualify for unemployment compensation, the amount of money you receive may be less than your regular paycheck.  Sometimes, unemployment compensation runs out, or you do not qualify, and this means that your income is zero.  While you are unemployed, you can file a Chapter 7 case, but you are prohibited from filing under Chapter 13 unless you have a regular source of income.

It may be to your benefit, especially if you usually earn $45,000 yearly, or more, to file a Chapter 7 before you get back to work.  This is because there is an income test in Chapter 7 cases, meaning you can have too much income to do a Chapter 7. This usually comes into play over $45,000, in urban areas like Chicago.  If you are not a higher income person, this timing is not so important.

You may not want to not file a Chapter 7 case unless you are already back to work, for several reasons.  First, your bad luck may not be at an end.  If you are out of work, you probably don't have medical insurance.  If you become ill after you have filed a bankruptcy, and run up a bunch of medical bills, you will have to pay them, because you will have used up your chance to do a bankruptcy already.  Secondly, if you are not working, your money is short, and if you fall behind in your rent or utilities, or your car insurance lapses because you didn't pay it and you wreck your car, you will have already used up your 6 year chance to file a bankruptcy and start fresh.  Thirdly, when you aren't working, no on can garnish your wages, and you probably don't have any savings that they can attach, so what is the point of doing a bankruptcy until you are back to work? 

The reason for doing a bankruptcy is to start fresh.  You cannot start fresh if you are still out of a job.  Once you return to work, a bankruptcy can be filed in as little as one day, to protect you from creditors, so wait until you are back to work to worry about getting rid of your bills.  You may run up some more before that happens!

Illness

Bankruptcy can discharge medical bills not covered by insurance.  Many people are forced to seek relief from medical bills they cannot pay, because either they have no insurance, or their insurance did not pay all the bills.  Medical bills can be devastating.  A discharge in bankruptcy will eliminate all bills up to the date of filing the case.  If you have a chronic illness, or have to get more medical treatment, it may be a good idea to wait until you are sure that you will have no more uninsured medical bills to pay, before you file a bankruptcy.  Your bankruptcy lawyer can advise you on this.

Bad Luck

Most people who work for a living have little or no savings.  They need to spend their paycheck on current expenses, and there is very little to save.  Any excess income is spent on entertainment and on buying consumer goods.  If there is any break in the income, this is a disaster.  Having a car break down, and missing work for a week because of it, can sometimes put a person behind in their bills so that it is impossible to catch up.  Usually, it will take more than a week, though.  Plant closings are an example of bad luck that is forcing many Americans to totally restructure their lives, and makes it impossible to meet their credit obligations.  Loss of a job is a major cause of bankruptcy.

Another variation on the loss of a job, is reduction of pay.  The employee is still working, but the pay has been reduced.  This happens when a company breaks a union, or when employees have to voluntarily accept pay cuts in order to prevent the company from going out of business altogether.  I have had many employees who were making $12 to $18 per hour suffer pay cuts down to $6 to $9 per hour, and this makes it impossible to live at the same standard as when the pay was double.  Something has to go, and especially if there is only one person in the family working, bankruptcy is the only solution to pay cuts.  It enables the family to go back to just paying its regular living expenses, instead of paying for a lot of luxury items on credit.

Illness has already been discussed as another form of bad luck.  Sometimes the bad luck of other people will cause a person to have to get relief from creditors by filing under the bankruptcy laws to discharge their debts.  A recent phenomenon is bankruptcy caused by drug or alcohol use. A person may be married to someone who has bad habits that cause them to default on joint debts, or to use their charge cards to support an irresponsible life style.  The other person is stuck paying for the results of the addiction.  I have seen mothers and fathers who have had to use all their savings, and all their credit, in trying to pay for treatment and defense of their drug addicted children.  Finally, they have spent all their savings, borrowed beyond their credit limit, had their property stolen by the addict child to sell for drug money.  Then they can no longer meet the payments on the loans they have taken to help their child, and bankruptcy is the only alternative to wage garnishments and lawsuits.

Death of a person that was contributing to the household expenses can make it impossible for survivors to pay creditors.  I have seen many people who otherwise had good credit, but had sudden deaths in the family, and had to go further into debt in order to pay the funeral expenses of their loved ones.  Not only the expenses of death of their relatives, but the time off from work, and travel expenses to distant home towns, account for more than a few bankruptcies.

Underemployment

Salaries in the last 10 years have not kept pace with expenses.  The cost of apartments, cars, food, gasoline, and clothing, goes up 10% or more each year, but salaries do not.  The standard of living is actually going down in this country, thanks to things like foreign cars, and "Reaganomics."  Many people, such as steelworkers, have had to take lower paying jobs.  Many factory jobs are not available due to shifts to non-union states, and to foreign countries, so former factory workers may have to take lower paying jobs in retail, just to have a job.  When you have to take a lower paying job, you may have to get rid of your debt with a bankruptcy

Problem: Bill and Sally have been married for 20 years. Bill recently lost his job in middle management, and is now working at half his former salary, driving a limousine. Sally had an operation, and since there was no insurance, owes $8,000 in unpaid medical bills. She used to be a secretary, but knows nothing about computers, and can only work for $6.50 an hour as a receptionist. They can't pay for their credit card debt that used to be easy for them to pay.

The Peter Francis Geraci Chapter 7 or 13 Solution: Underemployment and illness will require Bill and Sally to readjust their life style. A Chapter 7 to get rid of their credit card debt, and avoid lawsuits and garnishments, will help them start fresh, or a Chapter 13 to give them a no interest repayment plan.

No.  Owing money you can't pay is bad. Money can be used for good or bad purposes.  People end up without money because of circumstances beyond their control, or for other reasons.  Bankruptcy merely adjusts the debt situation to 0 again.  You start out even.  You get a fresh start, while still keeping the necessities of life.  But the prevailing attitude about bankruptcy is that is "bad."

This is an interesting perception.  The origin of bankruptcy can be found in ancient traditions, as found in the Bible, Deuteronomy 15.1:  "In the 7th year, each creditor shall release his debtors.  This shall be known as The Lord's Release."   In the Old Testament, it was the policy that a debt could exist only 6 years, and should be relaxed or forgiven in the seventh year.   The purpose was to prevent damage to society by allowing a debt to live forever.  The lender was cautioned thereby to lend only as much as the borrower could reasonably be expected to repay. 

There are other Biblical references to debt, such as St. Paul's admonition in Romans 13:8; "Strive to owe no debt, except that debt that binds us to love one another."  I have found nothing in any religion that states that owing money to another is "good."  In the Koran, there is a prohibition against lending money at interest.  In most Moslem countries today, Moslems borrow at no interest from "banks of the faithful."

In modern times, lenders do not follow this idea.  In an era where charge cards are sent out through the mail and applications are "pre-approved", creditors lend money without regard to whether or not the borrower can pay it back.  They cover their losses by charging huge rates of interest.  I have seen contracts with interest rates as high as 53%.  In olden days, this was known as usury.  Technically, any lending of money at interest is known as usury.  But, until modern times, it was the money lender, or usurer, that was bad, not the poor person who had to borrow.

Of course, capitalism could not exist without the practice of lending capital and charging interest.  But bankruptcy laws provide a legitimate, legal, and moral safety valve for the excesses of the credit system.  Now, you don't have to join the French Foreign Legion, disappear to Australia, or blow your brains out, to escape from your creditors. Bankruptcy was so important to the Founding Fathers of the United States, that, when the U.S. Constitution was written in 1787, they directed Congress to make uniform bankruptcy laws.  Article III, Section 8 of the United States Constitution states: "Congress shall make uniform laws relating to Bankruptcy."

Bankruptcy is therefore more fundamental to the United States of America than the Bill of Rights, and such things such as freedom of the press, and freedom from unreasonable searches and seizures.

The United States Bankruptcy laws are part of the Federal Code.  They were passed into law by the United States Congress, our elected Senators and Representatives.  All bankruptcy in the United States is governed by federal law, and the procedures are as much a part of our society as lending money at interest.

After the American Revolution, when the first Continental Congress met in 1787, one of the topics debated was whether or not to have a uniform bankruptcy law.  Many of the American settlers had to run from creditors in England.  They had to leave the country to avoid being thrown into debtor's prison.  Each American colony had different laws relating to collection of debts.  Some had provisions that a person could be jailed for debt, and some, like the colony of Georgia, were havens for debtors and had laws which prevented bad treatment of people who owed money.

There was little disagreement between the Founding Fathers of the United States of America, when it came to having a bankruptcy law.  Freedom from debt was important, and so was the ability to start fresh.  Therefore, in the United States Constitution, Article III, Section 8, we find the provision, "Congress shall make uniform laws relating to bankruptcy."

However, the banking lobby was so strong that each state kept their own bankruptcy laws until 1898, when the U.S. Bankruptcy Code was passed.  It was modified greatly in 1978 to deal with the amazing amount of consumer credit, and is constantly being tinkered with by Congress to balance the interests of those who lend money, and those who borrow it.

It is to the advantage of moneylenders, however, to use public relations techniques to convince the public that bankruptcy is bad, and to make it something that  is bad or evil.  I agree that you should not discharge your debts until it is absolutely necessary, but there is certainly nothing wrong or illegal about it.  No one comes out to your house and takes your clothes.  No one paints a big "B" on the sidewalk in front of your house.  In fact, no one is interested.

If you find yourself with no savings, nothing left over after you pay your rent, mortgage, food and utilities, and still have bills to pay, you should consider taking advantage of the fresh start provisions of the bankruptcy law.  Bankruptcy is like getting a fresh start.  Your debts are forgiven, except those that you want to continue to pay, and you can start saving money and doing things the right way, instead of suffering because of the credit trap.

People come into my office and ask, "What will happen to me if I file a bankruptcy?"  No one ever came in, when I used to be a general practice attorney, and said, "What will happen to me if I don't have get convicted for running a red light?"  They never said, "What will happen to me if I sell my house?"  But people who are being chased by bill collectors sometimes feel that they should not be able to get relief and that they will be punished if they get a fresh start.  They do not realize that a big part of bankruptcy laws is forgiveness.

Nothing will "happen" to you if you file a bankruptcy.  You won't suddenly become rich and famous, or popular, or beautiful or handsome, and, on the other hand, you won't suddenly be miserable and an outcast.  One out of every 22 Illinois families will file for some type of bankruptcy relief, on the average, and in some states, the average is higher. 

I'll lose my car.  NO.  The only people who lose cars are those who want to give them back.  We can tell you in advance if there is a problem with your car.  Most people get rid of their bills, but keep their car. 

I'll lose my house. NO. No one files a bankruptcy to lose anything.  Your attorney calculates your net equity in your house and determines what kind of bankruptcy will help you keep your house while dealing with your other bills.  You don't lose your house. 

What about 7 years?  THERE IS NO SUCH THING.  You cannot file another bankruptcy Chapter 7 for 8 years after the last one, but you can start fresh and apply for credit as soon as you are discharged of your debt.  There is no 7 year waiting period to start over. You can apply for new loans even during a bankruptcy. 

If I filed Chapter 7 before, Can I file Chapter 13?     Yes.  No waiting 8 yrs

If I filed Chapter 13 before, Can I file Chapter 7 or another 13?  Yes.  You will need to know the date you filed each case, and whether it was discharged or dismissed.

My credit will be bad.  It probably is now. YOU HAVE TO MUCH CREDIT, NOT GOOD CREDIT. Your credit (ability to borrow more money) is probably bad now, because you have too many bills and are only paying interest.  After a bankruptcy, you have no bills, usually, except house or car payments.  You can start to rebuild your credit.  It won't be good again until you have some money saved, and re-establish a good record of repayment.  Everyone who asks this question has already ruined their credit!  But your "credit" is usually better faster if you filed for some relief under the bankruptcy laws and get rid of your bills and save some money in your bank account. 

I'm afraid. NO.  Bankruptcy proceedings are very low pressure.  Many times, there is not even any appearance in court. 

Everyone will know.  NO.  Except in very small towns, no one cares.  Notice goes to creditors only. 

My credit union will hate me. Sometimes.  If you have a co-signer, you will just keep up your same payments.  If you just have a charge card or personal loan from your credit union, you can stop your payroll deduction, and treat them just like any other creditor.  They have no connection to your employment, other than they may rent space at your place of employment.  I'll never get credit again.   NO.  Unfortunately, there are plenty of finance companies ready to lend you more money as soon as you get a fresh start. 

I'll never be able to buy a home.  NO.  You certainly can't buy one now, can you?  And if you don't get rid of your debt, you never will be able to save the down payment.  Terms are stricter after a bankruptcy, but plenty of people are accepted for home mortgages after bankruptcies.  

The attorney fees are expensive.  NO.  They are often the smallest part of the picture.  The only court cost in a Chapter 7 is $274.00, and we can accept our fees in installments. If you are getting rid of your bills, it will be very easy to pay a lawyer.  Most people open a file with my office with $150 or $200 down, and pay our fees in installments over the next 6 or 8 paychecks. 

I'll never get a bank account. NO.  If you have a checking or savings account now, you can keep it.  If you don't have one, you may have a problem because banks are getting real picky about opening accounts for people with no money.  So if you don't have an account now, we suggest you open one BEFORE you file a bankruptcy. 

It takes a long time.  MAYBE.  Chapter 13 repayment plans last 3 to 5 years, but Chapter 7 proceedings are generally closed within 6 months, so you can start fresh then. 

I can go to just any lawyer and do a bankruptcy.  NO.  Bankruptcy work is generally concentrated among lawyers who do a lot of it, because it requires specialized knowledge.  If the lawyer does not do bankruptcy work every day, he may not want to keep up with the latest developments in the law.  We recommend asking any lawyer you may want to represent you, the questions in our brochure under "QUESTIONS TO ASK YOU LAWYER ABOUT HIS KNOWLEDGE OF BANKRUPTCY"