Thursday, June 28, 2012

G is for Garnishment

Many people file bankruptcy because a creditor has a garnishment.
A garnishment is a court order to deduct a portion of a debtor's wages to pay a creditor who sued the debtor and obtained a judgment.

Garnishments are stopped though the instant a bankruptcy case is filed, regardless if it is Chapter 7 or Chapter 13.  In my Chicago bankruptcy law office, we send a fax notice to the creditor's attorney as to the payroll department or HR supervisor.

Contrast this with a wage assignment.  A wage assignment is where you authorize the creditor to deduct a payment from your wages if you don't make voluntary payments.  The most common are from payday loans.  These can be stopped instantly, before bankruptcy, under the Fair Debt Collection and Practices act and the Wage Assignment Act under the Federal Trade Commission rules.

Contact your attorney, or call us if you need one as soon as possible to help with any of these types of matters. We are here to help!  312-427-7400

Wednesday, June 27, 2012

Update to B is for Baseball and F is for Fraud...

As a followup to B is for Baseball Bankruptcy and F is for Fraud, Lenny Dykstra, a former baseball star has entered a plea agreement with the feds who accused him of defrauding creditors by declaring bankruptcy and then looting his $18 million mansion. He allegedly liquidated assets of his bankruptcy estate. This is bankruptcy fraud, as opposed to fraudulent debts.    Basically, the bankruptcy code says you must disclose all possible assets, debts and financial affairs when you file, subject to fines and prison should you not do it.

See the full article here.

'47 Brand Chicago Cubs Mvp Baseball Cap - Men (Google Affiliate Ad)

F is for Fraud

Ok, a nice simple one here folks.  Fraudulent debts are non-dischargeable under bankruptcy.  Creditors would have the right to file an adversary objection to discharge. The bankruptcy code section they would file their adversary under is 11 USC 523   The common objections seen are for actual fraud, but also conversion, embezzlement, theft, or intentional torts such as intentional personal injury, or personal injury from driving under the influence of drugs or alcohol.

Under chapter 13, these debts can be paid back 100% though, if the debtor can afford it. If paid less than 100%, the debts could survive the case, but a portion could be paid down. 

Tuesday, June 26, 2012

E is for Educational debts

Debts related to education: tuition, student loans, room and board, etc, are generally not dischargeable in Chapter 7 bankruptcy. There is an exception, if the debtor can show that they are an undue hardship to repay. There are two lines of cases, but a debtor would have to show that they would never be able to repay them now, or ever in the future. A catastrophic injury, or other similar tragic occurrence is usually needed to meet this requirement. The one case I've seen is a 20 yr old woman who had a stroke and was forced to have her parents care for her for the rest of her life.

Under chapter 13, a debtor can pay down these debts, but the remaining unpaid portion remaining at the end of the bankruptcy, will survive and must be repaid.

Tough rules, but there are rumblings in Congress of possible changes under consideration.

Stay tuned.

D is for Discharge

D.  Choosing which topic for D was daunting. LOL, get it, D(aunting)?  I Digress.  I could have went with Debtor, Disposable Income, Domestic Support Obligations, Debtor Education Certificates among others.  But, what do people who file for bankruptcy really want?  Yes, a DISCHARGE.
A bankruptcy discharge comes approximately 90-120 days after a routine chapter 7 and upon completion of a chapter 13 repayment plan.   The automatic stay is what gives the case the bite, but the discharge is the rag that wipes all of the dischargeable debts away at the end of the case.  Most people are surprised that the discharge is just a single sheet of paper.  But, it is the permanent injunction preventing any further action by the creditors of a debtor.  They cannot take any action against the debtor -collection, calling, suing, nothing.  All scheduled creditors get notice of the discharge by mail from the court.  The discharge will also show up on a debtor's credit report as well.

If a creditor does take action, you can just send them a copy of the discharge notice and that should do the trick. If it doesn't, have your lawyer bring a discharge violation action against that creditor, and the court could grant punitive damages for each violation.

Monday, June 25, 2012

C is for Conversion

World's most expensive movie poster seized in bankruptcy case

This is a great article about one of the most expensive and rarest movie posters of all time.  Debtor was forced to convert to chapter 7, after the court determined the debtor abused the chapter 11 process by trying to liquidate assets outside of the bankruptcy case, without permission to do so.  It also appears that the debtor undervalued the assets as well. Now, the debtor will likely lose most of these movie posters, they'll be going up for auction and the proceeds will go to pay the debtor's creditors.

Friday, June 22, 2012

B is for Baseball Bankruptcy

Yes, in fact major league baseball teams have filed for bankruptcy.   Now, keep in mind, they filed under Chapter 11, a reorganization, you will not be able to take home some rare memorabilia from a fire sale.

In fact, The Chicago Cubs, Los Angeles Dodgers, Texas Rangers are among the most recent bankruptcy filers.   Often, it is a way to restructure long term stadium deals, ownership changes, and even as part of a divorce...I'm looking at you LA.

So take it to heart, bankruptcy can be a great tool to help you achieve your long term goals.  Don't let negative connotations get you sidetracked on your way to financial freedom if you are considering bankruptcy case.   Get the facts from competent legal counsel. Read more about chicago bankruptcy here.

ABC's of Bankruptcy A is for Automatic Stay

Over the next few weeks, I'll be posting some useful bankruptcy information.  I'll call it the ABC's of Bankruptcy.   Some will be fun, some will be instructional, but all will be informative.

Lets get to it.
A is for Automatic Stay.

This falls under Section 362 of the bankruptcy code.  It's what gives bankruptcy it's teeth against creditors.   The Automatic stay prevents creditors from taking action against bankruptcy debtors.   It stops the phone calls, it stops the collection letters, it stops the lawsuits.  It stops the garnishments from a debtor's paycheck.  The automatic stay can help get utilities back on for debtors, it can stop repossession of a car, and even get it back in a chapter 13.  The automatic stay is what stops the foreclosure process too.   Therefore, this is arguably the most important tool in your bankruptcy lawyers arsenal.  It kicks in the instant the bankruptcy case is filed.  Creditors don't have to get notice either, hence the word "AUTOMATIC."

To discuss more, you can contact me at