Next Up: Illinois Municipal Bankruptcy
Debt-burdened local governments explore the contentious option of going to court to cut, reorganize and dump their financial obligations, a Rescuing Illinois report reveals.
At its recent annual conference the Illinois Municipal League, a century old adviser and advocate for local government, took the unprecedented step of sponsoring an in-depth session on a volatile topic: hometown bankruptcies.
The September 18th session, entitled “Finance: Lessons from Detroit and Pension Cases,” couldn’t have been timelier. Many of Illinois’ municipal leaders are warily eyeing Motown’s bankruptcy proceeding while questioning whether their financially desperate and cash-crunched cities, suburbs and villages could face the same fate, a Rescuing Illinois investigation finds.
Technically, Illinois municipalities can’t file for bankruptcy, although a pair of small downstate towns actually did, but they flew far under the radar and went though the process virtually undetected.
Still, efforts are emerging to formally sanction bankruptcy, and among the most outspoken proponents is the mayor of Rockford, the state’s third largest city and one of its most debt-ridden.
If you don’t see the video above, .
How To File For Bankruptcy
Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue.
Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you cant afford to hire an attorney, you may have options for free legal services. If you need help finding a lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. Its not simply a matter of telling a judge Im broke! and throwing yourself at the mercy of the court. There is a process a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps are:
Reviewing Income Vs Expenses
First off, when you look at your income you will be using the last 6 months leading up to the bankruptcy filing date. If your income doesnât fluctuate from month to month then timing isnât so important. However, for those who may have worked a lot of overtime recently, or those about to receive a bonus, the timing of filing for bankruptcy can determine your eligibility. An individual who is eligible for Chapter 7 in March, may not be eligible come April if they receive a bonus or get an unusually large paycheck from overtime work.
Determining your gross income can be difficult if youâre a business owner, but if youâre a wage earner or salaried employee it should be pretty straightforward. Gross earners are what you make before anything is taken out of your paycheck for taxes, insurance, etc. Other sources of income that should be included in the means test are:
- Business and rental property income
- Unemployment income
- Pension and Retirement income
When looking at expenses, those who make more than the median household income may still qualify for Chapter 7 if the means test reveals they donât have enough disposable income to pay 25% of their unsecured nonpriority debt over a period of up to 5 years. This is not as straightforward as it sounds, and each state, and sometimes county, has its own guidelines determining what amount qualifies and what does not.
Go To Court To File Your Forms
When you head to the court for the purpose of filing bankruptcy in Illinois, it’s important to bring a government issued picture ID with you. The building you are going to is a federal courthouse, and you have to pass through security on the way in. Especially if you donât live or work near the courthouse, make sure to check the courtâs website before heading out. Due to the ongoing coronavirus pandemic many courts – while still operating – have limited their in-person services.
When all is done, youâll get a case number assigned to your Chapter 7 case. If any of your , you can simply give them your case number and tell them theautomatic stay protects you. The automatic stay goes into effect the moment your case is filed, and your creditors have to follow it even if the bankruptcy court hasn’t yet mailed a notice to anyone.
Illinois Chapter 13 Bankruptcy Information
Under a chapter 13 bankruptcy, a debtor proposes a 3-5 year repayment plan to the creditors offering to pay off all or part of the debts from the debtors future income. You can use Chapter 13 to prevent a house foreclosure make up missed car or mortgage payments pay back taxes stop interest from accruing on your tax debt keep valuable non-exempt property and more. If you can stick to the terms of your repayment agreement, all your remaining dischargeable debt will be released at the end of the plan . The amount to be repaid is determined by several factors including the debtors disposable income as is usually determined as part of the Illinois Means Test. In addition, the total amount paid to creditors under the Chapter 13 plan must also be at least as much as creditors would have received if the debtor filed a Chapter 7 bankruptcy. To file Chapter 13 bankruptcy you must have a regular source of income and have some disposable income to apply towards your Chapter 13 payment plan.
Chapter 13 bankruptcy is generally used by debtors who want to keep secured assets, such as a home or car, when they have more equity in the secured assets than they can protect with their Illinois bankruptcy exemptions. Chapter 13 bankruptcy is a reorganization whereas Chapter 7 bankruptcy is a liquidation.
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Finding The Illinois Homestead Exemption Statute
Illinois’s homestead exemption is found in the Illinois state statutes at 735 Ill. Comp. Stat. 5/12-901 and 5/12-902 on the Illinois General Assembly website. You can learn how to find state statutes in Laws and Legal Research.
The statute portion of the Illinois General Assembly website might not post the most current exemption amounts. If a session of the General Assembly has ended and the amounts were updated, the current amounts will be posted on the General Assembly Public Acts area.
Illinois Bankruptcy Exemptions And Law
COVID-19 Statement â Many Illinois bankruptcy courts are closed: Illinois has three federal court districts and some courts and offices have closed down or reduced their operations during the pandemic. Since bankruptcy filers must comply with strict schedules and deadlines, during the pandemic many courts are allowing documents to be filed electronically, by mail, by fax, at a dropbox, or other methods. Many court proceedings are being conducted by telephone or video conference. Please check your area bankruptcy court’s website for more information on procedural changes the court has made in response to COVID-19.
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How Much Does It Cost
In Chicago and the rest of Illinois, you will have to pay a filing fee of $335 when you file your case. At DebtStoppers, well advance you the filing fee cost, so you can get the debt relief you need today with no up-front cost.
Because every case is different, our legal fees can vary, but are among the most reasonable anywhere. Affordable payment plans are always available.
What Information Should I Include On The Proof Of Claim
The claim form requires:
You must be as complete as possible in asserting your proof of claim and should attach supporting documents, such as a file-stamped complaint, employment contract, or judgment, as appropriate. You should include all components of the claims and relief sought against the defendant/debtor in the proof of claim, including compensatory damages, equitable relief, prospective relief, prejudgment and postjudgment interest, and attorneys’ fees. See our site’s damages page for more information about these different types of damages.
If the complaint has been filed without a specific amount, you may list the amount of the claim as “undetermined.” You should consult with your attorney to prepare this information, or have your attorney prepare it for you.
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The Chapter 13 Hardship Discharge
After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a “hardship discharge.” 11 U.S.C. § 1328. Generally, such a discharge is available only if: the debtor’s failure to complete plan payments is due to circumstances beyond the debtor’s control and through no fault of the debtor creditors have received at least as much as they would have received in a chapter 7 liquidation case and modification of the plan is not possible. Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C. § 523.
How Illinois Bankruptcy Exemptions Work
You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt propertythings not covered by an exemptiondifferently.
- In Chapter 7 bankruptcy, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors.
- In Chapter 13 bankruptcy, you keep everything you own. However, you must pay the value of the nonexempt property equity in your repayment plan, or your disposable income, whichever is more.
The different approaches ensure that creditors receive the same amount regardless of the chapter filed.
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Paying Off Loans Before Filing For Bankruptcy
Most people would be surprised to learn that, in general, you donât want to pay off your loans before filing bankruptcy. For loans or debts owed to a family member, payments made as far as two years before filing for bankruptcy can be recaptured these are called âpreferential transfers.â Obviously, if the friend or family member already spent the money you paid back, it can have devastating consequences. The bankruptcy trustee must apply the Bankruptcy Code objectively when considering adversarial proceedings. Despite the financial status of the friend or family you paid back, the trustee can recapture the funds. Trying to give the money away instead of calling it a loan repayment is even worse and might cause the trustee to investigate you for fraud.
Other loans such as car loans and unsecured debt donât need to be paid off if youâll be filing for bankruptcy. Non-priority unsecured debt will be discharged, so paying it off ahead of bankruptcy is pointless, and if you pay a car loan down, thinking you will get to keep it after the bankruptcy, think again. The more equity you have in an asset like a vehicle, the more likely the trustee will order the asset sold to cover your creditors. Bottom line, if youâre heading for bankruptcy, speak with an attorney about what you should and should not be paying.
Learn more about how your mortgage is impacted by filing for bankruptcy here.
How Far Back Can I Recover Damages From The Defendant Employer In My Bankruptcy Claim
The Bankruptcy Code has been held to limit an employee’s claim based upon a prepetition judgment obtained by the plaintiff against the debtor more than two years before the bankruptcy petition was filed. However, some courts have disagreed with these rulings, so it is important to work with your lawyer to determine what the scope of your claim should be.
History repeated itself as hundreds of miners spilled out of buses in June and July to leaflet the Manhattan offices of asset manager BlackRock, the largest shareholder in the mining company Warrior Met Coal.
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Forms To Use When Determining Chapter 7 Bankruptcy Eligibility
Form122A-1: This is the first form for the means test and determines if your median income is below the median household income for the rest of the country.
Form 122A-2: This form is the second part of the means test and is to be used if your income is above the state median.
Form 122A-1Supp: This form is only for certain groups, such as veterans or military personnel, who may not have to take the means test at all. For more information on this speak with a qualified attorney.
Which Type Of Bankruptcy Should A Person File
Just as when to file for bankruptcy depends on an individuals situation, the type of bankruptcy also falls in this category. There are two types of personal bankruptcy an individual can file, Chapter 7 and Chapter 13. Chapter 7 bankruptcy will discharge most, if not all, of a persons debt. This allows the person to begin anew with a clean financial slate. Chapter 13 bankruptcy gives the filer a repayment plan to pay off their debts instead of discharging them. If you are unsure of which type of bankruptcy is best for you, a Champaign, Illinois bankruptcy lawyer can provide you with that legal advice.
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How Does Chapter 7 Bankruptcy Work In Illinois
uncover more How Does Chapter 7 Bankruptcy Work In Illinois
Learn A number of Important Particulars When selecting A Bankruptcy Attorney
If you’re planning on finding a bankruptcy attorney, you need to be sure of some things which means you understand that you have made the correct choice. In the end, you should not keep your funds to just any individual. Find out several information that you can look out for in the particular firm that will deals with your current situation.
You ought to 1st check if this topic is the only 1 handled by the lawyer. You will want specialist, certainly not somebody that dabbles in a little almost everything. Which means you need to look for a las vegas bankruptcy laywer in particular, not really someone that furthermore offers a good deal using divorce, defense, or tax regulations. You may well be shocked what number of legal professionals tend to undertake all types of cases. While it’s great in order to acquire tips on many topics at just a person agency, it is best to locate a specialist because he or she can perform a congrats on the chapter 13 case, not only a great alright work upon many cases for similar particular person. You will discover this particular depth online because most legal internet sites mention that training areas the particular law firms are usually informed about.
How Does Chapter 7 Bankruptcy Work In IllinoisHow Does Chapter 7 Bankruptcy Work In Illinois
Who Should File Chapter 13 Bankruptcy
Many people think of bankruptcy court as the final stop on a path to financial ruin, the only option left when repaying debts seems impossible. But theres hope even in bankruptcy, and Chapter 13 of the federal bankruptcy code offers the closest thing to a soft landing.
Sometimes called the Wage Earners Bankruptcy, Chapter 13 allows those with enough income to repay all or part of their debts as an alternative to liquidation. Its bankruptcy for those whose biggest problem is dealing with creditors demands for immediate payment, not lack of income.
One of its most attractive features is the chance to keep your home after Chapter 13 bankruptcy as long as you can pay the mortgage and any amount required by your Chapter 13 repayment plan..
Under Chapter 13, people have three to five years to resolve their debts while applying all their disposable income to debt reduction. The option allows applicants to eliminate unsecured debts while catching up on missed mortgage payments. Short-circuiting home foreclosure is one of the options most attractive features. Though keeping your home can be a major relief, youre required to spend years living under the supervision of a court-appointed trustee who will collect and distribute your payments.
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Bankruptcy Discharges All Debt
While it would be nice if bankruptcy got rid of all your debts, it does not work that way. Bankruptcy can get rid of the majority of unsecured debts, like credit card bills, medical bills, and personal loans. However, it will not be able to discharge student loans, child support, and back taxes. You will still be responsible for paying these debts after you file for bankruptcy.
Bankruptcy And Discharge Of Student Loan Debt
An interesting decision came down recently where a bankruptcy judge ruled that $220,000 in student loan debt can be discharged. It has often been said that you cannot discharge student loan debt to the Federal Government. However, in this case, the debtor had an annual income less than $38,000, and his monthly income after expenses left him short $1,500 so according to the January 7, 2020 opinion by Chief U.S. Bankruptcy Judge Cecelia Morris of the Southern District of New York, the student loan debt was in fact dischargeable. Judge Morris considered whether the debtor could maintain a minimal standard of living if forced to repay the loans, whether an inability to maintain the minimum standard is likely to persist for a significant portion of the repayment period, and whether the debtor had made a good faith effort to repay the loans. Based on these factors, the debtor was entitled to discharge the student loan debt.
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