Cosigner responsibility

I was recently asked how a bankruptcy affects a cosigner.

Question: Hello. I filed for bankruptcy and was discharged a year and a half ago. At the time I had a car lease that was paid to date, but was still a part of my bankruptcy. (My lawyer advised me to turn in the vehicle so that I would not be responsible for extra fees and/or other things) My mother co-signed on this loan for me. My mother received a letter from the lender stating she owed them money for the return of the vehicle and for them to resell the vehicle. I have also received letters recently stating that money is owed. Is there a certain amount of time that these creditors can come after co-signers for the payment of things like this? I do not want my mom's credit to be affected by something like this and hope to resolve this situation as soon as possible. I look forward to hearing your answer.

Answer: Regardless of what you did in your case, your mom, as a cosigner can be held to the contract that she signed with the lender. If you turned in the vehicle early, then she would be responsible for the balance of the lease, minus what the creditor recouped in the resale. Mom would need to read the car loan contract for her responsibilities,as the creditor can always go after her to collect on what is still owed. Unfortunately, that is why creditors get cosigners, so that when one party doesn't pay, they can collect from the other. Unfortunately, the only thing that the bankruptcy did, is discharged your obligation, it doesn't discharge a cosigner's obligation.

Mortgage Fraud

Here is an article I saw today at Chicagotribune.com that tells of the recent charges filed in a huge mortgage fraud scheme. I touched on it in my earlier post here when I talked about the mortgage fraud seminar I attended a few months ago.

67 from Chicago area charged in U.S. mortgage fraud probe

By Jeff Coen and Todd Lighty | Tribune reporters
1:37 PM CDT, June 19, 2008

Federal authorities in Chicago this afternoon announced charges against 67 people in a sweeping investigation of mortgage fraud with national reach.

The U.S. attorney's office in Chicago said the dozens arrested here as part of Operation Malicious Mortgage include local mortgage brokers, loan officers, Realtors, home builders and lawyers.

A press conference was scheduled for 1 p.m. to discuss the charges, which include mortgage fraud, identity theft and bankruptcy fraud.

Federal prosecutors said the cases involve more than $170 million in fraudulently obtained home mortgages.

Across the country, prosecutors said 406 people have been charged in 144 prosecutions as part of the national effort. The FBI estimated losses at $1 billion.

"Mortgage fraud inflicts serious damage upon financial institutions but, more importantly, makes life more difficult for ordinary citizens," U.S. Atty. Patrick Fitzgerald said in a statement. "These crimes, on the scale being addressed today, cause banks and lending companies, which have been saddled with huge numbers of fraudulent mortgages, to tighten their lending practices and adjust the cost of doing business."
Read full article here.

Barack Obama discusses bankruptcy and debt

Here is an article from suntimes.com that follows up on yesterday's post about the candidates' views on debt, the economy, and bankruptcy.

Obama has round-table talk on South Side

June 12, 2008
BY ABDON M. PALLASCH

Democratic White House hopeful Barack Obama held a round-table talk today on the South Side with three consumers gouged by credit card companies.

“For too long, credit card companies have been using unfair and deceptive practices to trick Americans into signing agreements they can’t afford,” Obama said.

The credit card companies start with teaser rates of four percent, then jack them up to 30 percent, lower customers’ credit limits so they can then charge interest, late fees and over-the-limit fees on them, said Obama and Elizabeth Warren, a Harvard Law School professor who participated in the event.

Obama said he knew only too well how easy it was to get caught by deceptive credit card deals: In the interest of full disclosure, I've gone through this. I've had credit cards, Obama said.


Obama's Republican rival, Arizona Sen. John McCain, has been on the other side of bills on which Obama fought for consumer rights, such as the bankruptcy bill, Obama said. The bill made it harder for consumers drowning in credit card debt to seek refuge in bankruptcy, Obama said.

I fought this bill hard, as many of my colleagues did as well, Obama said. Ultimately it passed. It was jammed through. John McCain was strongly supportive of this bill.

Obama acknowledged that, Part of why our debt crisis is so bad is that some folks are making reckless decisions -- racking up big credit card bills by purchasing flat-screen TVs and other luxury goods that they know they can't afford. But he said the credit card companies are pushing many responsible consumers into inescapable debt.

He proposes a Credit Card Bill of Rights that bans the companies from unilaterally changing rates, especially on past debt; and a ban on charging interest on late fees.



We've heard three examples of what I think most people would say is grossly unfair, but this is not atypical, Obama said after the three told their stories at the Illinois Institute of Technology.

Ironically, Obama's national finance chair, Penny Pritzker, headed up a Chicago-area bank that critics said was a pioneer in predatory lending: Superior. The campaign said Pritzker and her family voluntarily paid $460 million to clear up the banks debts, though that still left 1,400 customers without some of their savings.

McCain's campaign charged that the man who, until today, headed up Obama’s vice-presidential search team, James Johnson, got special mortgage rates from his friend’s bank, Countryside, another sub-prime lender.

“On the same day Barack Obama is staring down headlines about the head of his VP selection committee’s inappropriate ties to a predatory lender, Obama launches blind political attacks against John McCain for voting for the bipartisan Senate Bankruptcy Bill that was actually supported by 18 Democrats,” said McCain spokesman Tucker Bounds.
See rest of article here.

Presidential Candidates views on Bankruptcy

Here is an excerpt from Barack Obama's webpage, detailing bankruptcy.

Reform Bankruptcy Laws

Obama will reform our bankruptcy laws to protect working people, ban executive bonuses for bankrupt companies, and require disclosure of all pension investments.

* Cap Outlandish Interest Rates on Payday Loans and Improve Disclosure: Obama supports extending a 36 percent interest cap to all Americans. Obama will require lenders to provide clear and simplified information about loan fees, payments and penalties, which is why he'll require lenders to provide this information during the application process.
* Encourage Responsible Lending Institutions to Make Small Consumer Loans: Obama will encourage banks, credit unions and Community Development Financial Institutions to provide affordable short-term and small-dollar loans and to drive unscrupulous lenders out of business.
* Reform Bankruptcy Laws to Protect Families Facing a Medical Crisis: Obama will create an exemption in bankruptcy law for individuals who can prove they filed for bankruptcy because of medical expenses. This exemption will create a process that forgives the debt and lets the individuals get back on their feet.


John McCain does not directly address bankruptcy on his John McCain website.

Helping Americans Confront Higher Living Costs:

John McCain Will Help Americans Hurting From High Gasoline And Food Costs. Americans need relief right now from high gas prices. John McCain will act immediately to reduce the pain of high gas prices.

John McCain Believes We Should Institute A Summer Gas Tax Holiday. Hard-working American families are suffering from higher gasoline prices. John McCain calls on Congress to suspend the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day.

John McCain Is Proposing A New "HOME Plan" To Provide Robust, Timely And Targeted Help To Those Hurt By The Housing Crisis. Under his HOME Plan, every deserving American family or homeowner will be afforded the opportunity to trade a burdensome mortgage for a manageable loan that reflects their home's market value.

Eligibility: Holders of a non-conventional mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30-year fixed-rate mortgage on the existing home.

How It Works: An individual picks up a form at any Post Office and apply for a HOME loan. The FHA HOME Office certifies that the individual is qualified and contacts the individual's mortgage servicer. The mortgage servicer writes down and retires the existing loan, which is replaced by an FHA guaranteed HOME loan from a lender.

John McCain Calls For The Immediate Formation Of A Justice Department Mortgage Abuse Task Force. The Task Force will aggressively investigate potential criminal wrongdoing in the mortgage industry and bring to justice any who violated the law. The DOJ Task Force will offer assistance to State Attorneys General who are investigating abusive lending practices.

Keeping The Credit Crunch From Hurting College Students:

John McCain Is Proposing A Student Loan Continuity Plan. Students face the possibility that the credit crunch will disrupt loans for the fall semester. John McCain calls on the federal government and the 50 governors to anticipate loan problems and expand the lender-of-last resort capabilities for each state's guarantee agency.

Let it be known that Obama voted against the bankruptcy reform in 2005, while McCain voted for the reform.

Most bankruptcy cases per capita

Here are the leading (perhaps not the best term to use) states based on bankruptcy filings per 1000 people.


1. Tennessee 6.70
2. Georgia 5.45
3. Alabama 5.29
4. Illinois 5.16 (total residents 12,831,970 - est. filers 66,213)
5. Michigan 4.82

Can Student loans be discharged in bankruptcy?

Generally, the answer is NO. Student loans and any debt for educational purposes are not discharged in bankruptcy. There was an exception, where you could ask the court to determine that the student loan was an undue hardship, but this was a very narrow exception. I have only seen 2 or 3 instances where a debtor was successful in this argument. The prevailing case law in this matter, is In RE Brunner.
831 F.2d 395 42 Ed. Law Rep. 535, Bankr. L. Rep. P 72,025 (Cite as: 831 F.2d 395)

The 3 prong test states:
Based on legislative history and the decisions of other district and bankruptcy courts, the district court adopted a standard for "undue hardship" requiring a three-part showing: (1) that the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. For the reasons set forth in the district court's order, we adopt this analysis. The first part of this test has been applied frequently as the minimum necessary to establish "undue hardship." See, e.g., Bryant v. Pennsylvania Higher Educ. Assistance Agency (In re Bryant), 72 B.R. 913, 915 (Bankr.E.D.Pa.1987); North Dakota State Bd. of Higher Educ. v. Frech (In re Frech), 62 B.R. 235 (Bankr.D.Minn.1986); Marion v. Pennsylvania Higher Educ. Assistance Agency (In re Marion), 61 B.R. 815 (Bankr.W.D.Pa.1986). Requiring such a showing comports with common sense as well.

The further showing required by part two of the test is also reasonable in light of the clear congressional intent exhibited in section 523(a)(8) to make the discharge of student loans more difficult than that of other nonexcepted debt. Predicting future income is, as the district court noted, problematic. Requiring evidence not only of current inability to pay but also of additional, exceptional circumstances, strongly suggestive of continuing inability to repay over an extended period of time, more reliably guarantees that the hardship presented is "undue."

US Trustee to get pay advices in all cases

Get your scanners and copiers warmed up folks....

As noted in emails from the court and on the Northern District of Illinois Bankruptcy Court homepage:

GENERAL ORDER No. 08-01

IMPORTANT NOTICE REGARDING PAY ADVICES
The Court’s Standing Order Regarding Filing of Payment Advices effective October 17, 2005 has been replaced effective June 23, 2008 by General Order No. 08-01 Regarding Pay Advices. For all Chapter 7 cases filed on or after June 23, 2008, pay advices must be provided to the United States Trustee, in addition to the case trustee and any creditor who timely requests copies. The current Standing Order Regarding Filing of Payment Advices applies to all cases filed on or before June 22, 2008.

With all of the record keeping and piles of paper that this will generate...I can only assume that the court filing fee will increase shortly.....

Celebrities who have filed bankruptcy

Here is a list of celebrities that have filed bankruptcy in the past

Abraham Lincoln

Benedict Arnold

John James Audubon

P.T. Barnum

John Barrymore

Kim Basinger

Frank Baum

John Wayne Bobbitt

Bjorn Borg

Lorraine Bracco

Toni Braxton

Lenny Bruce

Buffalo Bill

Gary Burghoff

Tia Carrere

Nell Carter

George Clinton

Samuel L. Clemens ("Mark Twain")

Natalie Cole

Gary Coleman

Francis Ford Coppola

David Crosby

Aleister Crowley

Vic Damone

Dorothy Dandridge

Daniel Defoe

Lee De Forest

John DeLorean

Walt Disney

Eddie Fisher

Mick Fleetwood

Heidi Fleiss

Henry Ford

Red Foxx

Zsa Zsa Gabor

Marvin Gaye

Andy Gibb

Gary Glitter

Charles Goodyear

Ulysses S. Grant

Bob Guccione

Johannes Gutenberg

Tony Gwynn

Merle Haggard

Corey Haim

Dorothy Hamill

M.C. Hammer

Isaac Hayes

Margaux Hemingway

Sherman Hemsley

Milton Snavely Hershey

Steve Howe

La Toya Jackson

Don Johnson

Chaka Kahn

Buster Keaton

Margot Kidder

Larry King

Marion "Suge" Knight

Lorenzo Lamas

Cyndi Lauper

Stan Lee

Jerry Lewis

Jerry Lee Lewis

Meat Loaf

Jackie Mason

Mindy McCready

William McKinley

Willie Nelson

Wayne Newton

Ted Nugent

Thomas Paine

Tom Petty

Gaylord Perry

Susan Powter

Randy Quaid

Lynn Redgrave

Burt Reynolds

Debbie Reynolds

Mickey Rooney

Billy Sims

Tom Sizemore

Anna Nicole Smith

Dee Snider

Lynne Spears

Leon Spinks

Sheryl Swoopes

Lawrence Taylor

Donald Trump

Mike Tyson

Johnny Unitas

Oscar Wilde

Tammy Wynette

Bankruptcy FAQ

BANKRUPTCY FAQ

1. WHAT EXACTLY IS A BANKRUPTCY? Bankruptcy is a federal created program designed to help consumers eliminate their debts or repay them under the protection of the bankruptcy court. 2. WHAT ARE THE MOST COMMON REASONS FOR FILING A CHAPTER 7 BANKRUPTCY? The most common reasons for consumer bankruptcy are: unemployment, high medical expenses, over-extended credit, marital problems and other large unexpected expenses. 3. CAN I KEEP MY HOUSE, CAR & PERSONAL BELONGINGS IF I FILE A CHAPTER 7? You can keep your house and your car as long as there is no equity in the house or vehicle and you are current on your loan payments, if any. In most cases you are able to keep all of your personal belongings. Illinois law allows you exemptions to protect most property from creditors. Consult an attorney at Leeders & Associates, Ltd. to discuss how the Illinois bankruptcy exemptions can protect your belongings. 4. CAN I KEEP ANY CREDIT CARDS OR FINANCED ITEMS? Generally you cannot keep your credit cards. However, some creditors will let you keep your credit cards or financed items if you reaffirm the debt and make payments to that creditor after your bankruptcy is discharged. 5. DO YOU HAVE TO HAVE A CERTAIN AMOUNT OF DEBT TO FILE? There is no statutory amount of debt that is needed to file a bankruptcy. 6. WHAT TYPES OF DEBT ARE NOT ELIMINATED IN A CHAPTER 7? Non-dischargeable debts such as student loans, parking tickets, government debts, child support and alimony, some IRS debts and fraudulent debts. Some exceptions do apply. Consult with a Leeders & Associates, Ltd. attorney to find out your legal rights. 7. WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 13 BANKRUPTCY? The most common reasons to file a Chapter 13 bankruptcy are: stop foreclosure, save your car, save your business, debt consolidation, repay student loans, IRS debt and other non-dischargeable debts and for those who have filed a Chapter 7 Bankruptcy in the last 8 years. 8. WHAT IS THE DIFFERENCE BETWEEN CHAPTER 7 & CHAPTER 13? Chapter 7 is designed to eliminate unsecured debts. Chapter 13 is designed to repay your creditors and keep your assets such as your car or home based on your ability to repay your debts. A Chicago bankruptcy attorney from Leeders & Associates, Ltd. can help you choose which chapter is best for you. 9. WILL I EVER GET CREDIT AGAIN? After your bankruptcy is discharged you will be able to get credit again. Often you are able to finance a vehicle as soon as your bankruptcy case is discharged. You are able to apply for and get credit cards and personal loans once you receive your discharge. Qualified applicants are able to buy homes within 1-2 years of receiving their bankruptcy discharge. 10. HOW LONG DOES A BANKRUPTCY STAY ON MY CREDIT REPORT? A Bankruptcy may remain on your credit report for 10 years after your bankruptcy case is discharged. However, you may be able to get credit during that time.

When can I file Bankruptcy again?

Bankruptcy Law Question:

Subject: Filed as individual 3 years ago

Question:
Hi. About 3 years ago I filed chapter 7 as an individual because I wasn't married. Now i'm married and unfortunately got myself into some more debt. Can I file again because my status has changed or do I still have to wait the 8 years?

Answer:
Hi. Unfortunately, you cannot file chapter 7 bankruptcy again until 8 years from the date you filed previously. Your option at this point is to file chapter 13 bankruptcy, where you can pay back at least a portion of the debt. However, if your previous bankruptcy was filed less than 4 years ago, you would not get a discharge at the end of the chapter 13. You should consider waiting until at least 4 years from the date you filed your chapter 7 bankruptcy, that way, you will get a discharge under the chapter 13 bankruptcy when you complete the debt repayment plan.

Save some money, free entertainment

With the ever increasing gasoline and food expenses, my clients and consumers both should take advantage of the many free (or relatively cheap) things to do this Summer.

Here is a quick list of ideas.

1. The beach. Chicago has many beaches to choose from in the city and suburbs. This article from the Red Eye Chicago Paper has a listing of the best features for the top beaches in Chicago.

2. The Art Institute of Chicago. 111 S Michigan Ave, Chicago, IL
Free to the public on Thursday evenings from 5pm to 8pm.

3. Lincoln Park Zoo. 2200 N Cannon Dr Chicago, IL 60614. Free admission.

4. Movies in the park. various locations. free. See Spiderman 3, Bee Movie, ET, Jaws, The Great Debaters, Hairspray and more. Bring your popcorn!

5. Free concerts at the Taste of Chicago Enjoy free concerts by Stevie Wonder, Plain White T's, Joss Stone, Fantasia, Bonnie Raitt, Chaka Khan and more.