Chicago Bankruptcy Lawyers & Attorneys

Starting September 12, 2008, the court location for Lake County bankruptcy cases will change.  The new address will be:
Park City Branch Court
Courtroom B
301 Greenleaf Avenue
Park City, IL  60085

The hearing times will not change from the schedule set at Lakehurst.  As for the Lakekhurst courthouse, we hardly knew you; we will hardly miss you.

In case you didn’t feel it, the numbers will tell the story. The total number of U.S. bankruptcies filed during the first three months of 2008 increased 26.9 percent over the same period in 2007. This figure is provided by the Administrative Office of the U.S. Courts which released the information today. Specifically, the total filings reached 245,695 during the first calendar year quarter of 2008 (Jan. 1-March 31), surpassing the 193,641 new cases filed over the same period in 2007.

Although we are nowhere near the amount of filings pre-reform, the uptick demonstrates that people in America are struggling significantly with debt. The bankruptcy reform laws of October, 2005 were just a speed bump on the road to future bankruptcy filings. If the sub-prime mortgage meltdown wasn’t bad enough, the current economic conditions and supra $4.00 a gallon gas prices have begun to take their toll. I believe that it is only a matter of time before filings propel to near record levels again. It will probably occur during the 2010 fiscal year.

Additional Information At Chapter 7 Bankruptcy

Yes, you read that correctly.  Debit audits are officially back as of May 12, 2008.  This is despite the fact that the panel trustee already examines the debtor, and despite the fact that the U.S. Trustee already reviews every petition filed with the Clerk.  The new notice from the office of the U.S. Trustee, dated May 9, 2008, clearly states that the U.S. Trustee will resume debtor audits.

Isn’t the U.S. Trustee technically doing debtor audits when bringing 2004 Exam Subpoenas?  Isn’t the U.S. Trustee already seeking tax documentation and proof of income through these 2004 Exam Subpoenas?  Of course.  However, they are not technically considered audits as mandated in Section 603(a) of Public Law 109-8, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Personally, I am still looking for the consumer protection portion of the Act.  I know I saw it somewhere, but I just don’t see how the consumers are really being protected.  I suppose that the reaffirmation hearings are some sort of consumer protection.  Or you could say that the hearings are just another burden placed on the debtor to convince the court that the debtor can afford his or her car.  This often requires additional time off of work, but that’s the debtor’s problem.  It will just make it a little harder to pay for the car on time.

I would have simply called the Act the Bankruptcy Code and I would have subtitled a section of that Code, Abuse Prevention.  Anyway, sorry for my digression.  The reason that the debtor audits were suspended was due to budgetary reasons.  I suppose everyone associated with bankruptcy, including myself, is spending more money than they did prior to bankruptcy reform.  As for the upcoming audits, they will be limited to 1 out of every 1000 cases as opposed to 1 out of every 250 cases as before.

Lastly, I don’t recall how many cases were dismissed or how many discharges were denied due to a debtor’s failure to pass the audit.  Were these audits simply attempts to demonstrate the type and extent of abuse promulgated by debtors?  If so, will auditing 1 out of 1000 cases have any impact at all?

The truth is simply that the U.S. Trustee is doing just what the Act mandates.  I would suggest that instead of robotically adhering to all provision of the Act, we should instead, make some revisions.  The reforms laws may have looked good on paper to those who lobbied eight years for the changes.  But looking good on paper and having an actual positive result are two different things.  It’s o.k. to admit that and to acknowledge that.  Now, an effort should be made to smooth over the rough spots and to clarify some of the ambiguities.  Otherwise, we will continue to wade in the minutia, all the while pretending to be walking on soft, sandy beach.  If the debtor audits produced little fruit and if the cost of said audits was prohibitive, why not look to make a change.  Throw it back to the lawmakers to make it right.  If everyone works together, it can probably get done within the next eight years.

Beware of the dangers in co-signing for another person:
In a hypothetical case of Joseph Debtor, a creditor was listed on the Petition and notice was properly sent.  However, in addition to Joseph Debtor, there is also a co-debtor, Courtney Co-Debtor.  The creditor can pursue the debt against the non-filing party, in this case, Courtney Co-Debtor.  People often assume that the underlying debt has been eliminated in a Chapter 7 bankruptcy case.  Actually, the liability of a particular debtor has been discharged in a bankruptcy.  The underlying debt still remains as to any liable party who does not file for bankruptcy protection. 

We see this often in the case of a co-signer to an auto loan.  One party fails to make timely payments and the creditor pursues both the signer and the co-signer.  If only one party files for Chapter 7 bankruptcy, the creditor is free to pursue the debt against the co-signer who has not filed.
 

The Clerk of the U.S. Bankruptcy Court for the Northern District of Illinois has just issued an updated version of the form required to accompany all motions for relief from stay.  The form includes the following items:

Debtor, Creditor, Relief Sought, Chapter 13 Confirmation Date Hearing or Date Confirmed;

Chapter 7  Report of No-Assets or Date of 341 Meeting of Creditors, Type of Collateral, Balance Owed, Other Liens Against Collateral, Estimate Value of Collateral;

Default, Pre-Petition, Post-Petition, Number of Months, On Direct Payments, On Payments to Trustee;

Other Allegations, Lack of Adequate Protection, No Insurance, Taxes Unpaid, Rapidly Depreciating Asset, Other;

No Equity, Not Necessary For An Effective Reorganization, Other Cause, Bad Faith, Multiple Filings;

Debtor’s Statement of Intention Regarding the Collateral, Reaffirm, Redeem, Surrender, No Statement Filed.

After close scrutiny, you will notice that there are some additional line items that were not present in the prior version of the form.  I think that creditors will have an easy time adjusting to the new, updated form.

There is nothing intuitive about filing amended schedules at the time of conversion from Chapter 13 to Chapter 7. You can spend an eternity looking for an event code on the bankruptcy clerk’s website that makes sense.  For example, if you are looking for “amended schedules at time of conversion”, you will never find it.  If you are looking for “conversion/amended documents”, you will never find it.  You must look for “Schedule Post-Petition Debts Rule 1019″.  Provided you stumble upon that event code, you will successfully file your schedules to the satisfaction of the clerk.
Importantly, you must remember to title your PDF just as written above.  The standard amended schedules language provided by most bankruptcy software companies will not do.

Bankruptcy Code Section 727(a)(8):  Debtor can receive a discharge under Chapter 7 of the U.S. Bankruptcy Code every eight years and a day.

Bankruptcy Code Section 1328(f):  Debtor cannot receive a discharge under Chapter 13 of the U.S. Bankruptcy Code if he received a discharge in a prior Chapter 7 bankruptcy case filed within four years OR if he received a discharge in a prior Chapter 13 bankruptcy case filed within two years.

Bankruptcy Code Section 521(a)(1)(B):  Debtor must submit payment advices within sixty days of filing bankruptcy; itemize the debtor’s monthly net income; disclose whether or not the debtor is anticipating any changes in income or expenses within the following twelve months.

There is an automatic dismissal for failure to submit the above items within 45 days.  On the 46th day, the case is dismissed.

See Also:  Chapter 7 Bankruptcy

The Fiscal Year 2008 Consolidated Appropriations Act, Public Law 110-161, provided no funding for debtor audits.  Thus, the United States Trustee Program has suspended its designation of cases set for audit.  The USTP is looking for other source of funding so that audits can be reinstated.
Additionally, pursuant to Section 603(a) of BAPCPA and 28 U.S.C. Section 586(a)(6), the USTP will make public the information concerning results of audits performed during fiscal year 2007.
If the USTP does not find alternative funding, it will be interesting to see if there is an increase in Rule 2004 Subpeonas.  Much of the information that was requested of debtors in their audits can be obtained via subpeona.

For additional bankruptcy information, visit Chapter 7 Bankruptcy

Chapter 7 debtors are required to provide specific tax information pursuant to Section 521(7)(e)(2)(A)(i) of the Bankruptcy Code.  The requirement states that the debtor shall provide, not later than 7 days before the date first set for the first meeting of creditors, to the trustee a copy of the Federal income tax return required under applicable law (or at the election of the debtor, a transcript of such return).
At issue is whether or not the Trustee can demand that the debtor provide the entire return, despite the fact that the Bankruptcy Code states otherwise?  Is this another attempt to muscle a debtor?  Is this a request from the panel trustee or is the request coming from the Office of the U.S. Trustee?
It will be interesting to see if the Trustee holds the meeting of creditors required under Section 341 of the Bankruptcy Code should he not receive the entire tax return.  What specifically is the Trustee looking for that is not contained within the tax transcript itself?  I will keep you all advised upon further information.

See Also:  Chapter 7 

Kudos to Mary Powers, a former attorney with the United States’ Trustee’s office, who testified recently before the Subcommittee on Administration & Commercial Law House of Representatives Judiciary Committee.  She testified that she was pressured to produced numbers of cases where there was presumed abuse under the current bankruptcy law.  She indicated that there was a visit from Director Lawrence Friedman, who showed her how it was done, relating to reviewing files for abuse.  Needless to say, Mary Powers was not pleased to have been told to look for a boat, which was not listed on the schedules.
Eventually, the lack of autonomy and strict pressure to produce numbers, led her to leave the US Trustee’s office.

See Also:  Chapter 7 

It seems that every week or so, another government official, politician, or head of a department, stands up before the media and discusses the pending foreclosure crisis in America.  They espouse different ways of assisting with the foreclosure crisis, including all working together to find a solution to help people save their homes.  In reality, most of these press conferences are nothing but rebuttals against criticism of the administration’s handling of the pending closure crisis.

The best way to solve the pending foreclosure crisis is to allow a modification to Chapter 13 bankruptcy cases.  That modification would allow homeowners to reorganize and restructure the amounts owed to their mortgage companies.  This may include extending out the term, changing the dollar amount, or changing the interest rate owed on the outstanding mortgage debt.

There are currently three proposals that are pending in Washington.  One proposal is from Senator Dick Durbin, known as Senate 2136.  This bill is the most liberal of all the bills being offered as a solution to the foreclosure crisis.  The second bill is from Senator Specter, known as Senate 2133.  This bill does help homeowners to a certain extent, but not nearly to the extent needed to actually allow homeowners to save their homes.  The final measure being introduced is by Representative Miller, known as HR 3609.  This measure is very liberal and very helpful to the homeowner.  However, it is missing some great detail.  Provided that the detail can be inserted and incorporated along with Dick Durbin Senate bill, these two measures provide the most realistic opportunity for homeowners to save their home while in foreclosure and stave off this impending foreclosure crisis.

In weeks past, the FHA has offered an initiative which would help some homeowners refinanced their mortgages, which are currently in arms that are adjusting.  Although this sounds like a great deal of help from the FHA, in reality it will only help a very small few of those that are in foreclosure.  To qualify for this loan, the homeowner must be current with their mortgage payments for the most recent six months and the arm must have just begun to adjust.  Absent those conditions, a person is not eligible to receive a loan under this new FHA initiative.  What this truly is just another attempt by the administration to forge a resolution to the problem.  However, this resolution will not do the trick.  If Congressmen truly want to help people save their homes, the Chapter 13 amendment is the most obvious solution.  There will be an extreme resistance from the banking industry about making any changes to mortgages be paid differently than they currently can be paid through Chapter 13.  However, to soften the blow and assist homeowners, the modifications can include a sunset provision or limitation on what years a loan can be modified from or for how long these loans can be modified.  What I’m talking about here, is a solution with some strength to it.  I’m not talking about stepping up to the press and talking about how all the mortgage companies are getting together to work with homeowners to restructure loans on their own.  Moody’s has reported that only 1% of these subprime loans have been modified by the mortgage companies.  That figure is completely inadequate and will not help the majority of homeowners save their homes from foreclosure.  Without question, the best resolution is Chapter 13 bankruptcy reform.

See Also:  Chapter 7 Bankruptcy 

David M. Siegel
9-19-07 appearance on FoxNews commenting on the current foreclosure crisis and how bankruptcy can be a solution

Link to Video | MyFoxChicago.com

On Saturday, September 1st, David Siegel will be a featured guest on the Townstone Financial Radio Show which airs on 105.9 FM, WCKG.  He will be on air from 1:30 - 2:00 P.M., taking calls and talking generally about adjustable rate mortgages and their affect on Chapter 13 bankruptcy cases.
The segment will be both educational and entertaining as Chapter 13 bankruptcy has been a huge focus in the news of late.  The sub-prime mortgage crisis and forthcoming foreclosure rush has brought Chapter 13 bankruptcy to the front pages.

For more information visit www.chapter7success.com and learn more about bankruptcy and the solutions it provides.

It has been almost two years since the bankruptcy laws were reformed.  However, it is still difficult to fully grasp the complexity of the means test.  This is especially true in cases where both spouses are not filing.  There are certain deductions that the non-filing spouse can include on the means test and several that cannot be included.

Just recently, it has been brought to my attention that the proper deduction with regard to autos is the total amount of the secured claim divided by sixty months.  This figure must be used whether the case is a Chapter 7 or Chapter 13 bankruptcy.  Although this does not always make a difference since this figure is often lower than the IRS allowance, there are times when it could be a big factor.

Mr. Cameron Gulden was helpful in pointing out some of the intricacies of the means test.  Hopefully, from this day forward, the means test will be completed to the letter of the law and the intent of the reformers.

For additional bankruptcy information, visit Chapter 7 Bankruptcy.

Judge Goldgar has released a decision In re Helene A. Hopkins, 07B 1134.  For purposes of Section 1325(a)(5)(B)(i)(I)(aa), the “debt determined under non-bankruptcy law” is whatever the amount the debtor owed the creditor under the contract at the time the petition was filed.  When the secured creditor’s claim is secured b a lien on a “910 vehicle”, the amount of the claim is treated as fully secured and the creditor retains its lien until the claim is paid in full.  In the Hopkins case, the debt owed to AmeriCredit was $11,898.00.  The manner in which the debtor goes about paying the debt through the plan is not dependent upon the contract.  Further, the contract rate of interest does not govern.
The creditor’s objection to confirmation of the debtor’s plan was overruled.  A separate order confirming the plan will be entered.
This holding by Judge Goldgar is the first such holding that I have witnessed.  I see no case in which an auto creditor will receive contract rate of interest before Judge Goldgar.  This is particularly good news for debtors and their attorneys who practice in Lake and Cook Counties in Illinois.