BANKRUPTCY FAQ      
 
FREQUENTLY ASKED QUESTIONS


1.  What is a section 341 meeting of creditors?


Section 341 of the Bankruptcy Code requires every debtor to personally attend a meeting of creditors and to submit to an examination under oath. The trustee presides over the meeting. Creditors may also question the debtor, but they are not required to attend the meeting, and usually do not appear.  You are required to bring a photo ID, your social security card.  Your lawyer may request your bring other documents such as your paycheck stub, real estate appraisals, and tax returns.

The trustee will ask a series of questions to verify the information contained in your bankruptcy petition.  These will be questions that your Chicago Bankruptcy Network attorney has reviewed with you ahead of time.  The Chapter 7 trustee is looking for assets or cash that he may be able to get to pay to your creditors.  The Chapter 13 trustee is making sure your plan conforms with the bankruptcy code.  They will review your income and expenses to make sure your can afford the payment plan your attorney has developed with you.

In either case, you will have a lawyer representing you at this meeting.  Your Chicago Bankruptcy Network Lawyer will be there to help the proceeding go smoothly, answer any questions, and defend your answers to the trustee. 
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2.  What is the automatic stay?

The automatic stay is your protection from your creditors once your bankruptcy case is filed.  It prohibits creditors from taking action to collect money or property from the debtor. The creditor who wishes to take action against the debtor must obtain permission from the bankruptcy court after a hearing.  A creditor who attempts to collect on a debt without getting this permission faces potential sanctions and claims for damages, including court costs and attorney's fees, and, in some cases, punitive damages. If this happens to you, contact your Chicago Bankruptcy Network attorney immediately to discuss your options available.
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3.  How long will bankruptcy stay on my credit report?

Under the Fair Credit Reporting Act, bankruptcy filing can remain on your credit report for up to 10 years.  However, most debtors are able to get new credit shortly after receiving their bankruptcy discharge.
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4.  What is a bankruptcy discharge and when will I receive mine?

You will receive your discharge notice in Chapter 7 usually 60-90 days after your meeting of creditors.  If you have not received it by this time, feel free to contact your attorney from the Chicago Bankruptcy Network.

Under Chapter 13, the discharge will be issued once your creditors receive the amounts allowed under your Chapter 13 repayment plan.  Once you have paid the trustee all necessary funds, the trustee will perform a final audit of your file and issue their final report.

The United States Trustee has issued a bankruptcy information sheet.  You will receive a copy of this document when you attend your 341 meeting of creditors.  Below is the text of this bankruptcy information sheet.

BANKRUPTCY LAW IS A FEDERAL LAW. THIS SHEET GIVES YOU SOME GENERAL INFORMATION ABOUT WHAT HAPPENS IN A BANKRUPTCY CASE. THE INFORMATION HERE IS NOT COMPLETE. YOU MAY NEED LEGAL ADVICE.

English Version [PDF -50 KB]

Bankruptcy Information Sheet

When You File Bankruptcy

You can choose the kind of bankruptcy that best meets your needs (provided you meet certain qualifications):

Chapter 7 – A trustee is appointed to take over your property. Any property of value will be sold or turned into money to pay your creditors. You may be able to keep some personal items and possibly real estate depending on the law of the State where you live and applicable federal laws.

Chapter 13 – You can usually keep your property, but you must earn wages or have some other source of regular income and you must agree to pay part of your income to your creditors. The court must approve your repayment plan and your budget. A trustee is appointed and will collect the payments from you, pay your creditors, and make sure you live up to the terms of your repayment plan.

Chapter 12 – Like chapter 13, but it is only for family farmers and family fishermen.

Chapter 11 – This is used mostly by businesses. In chapter 11, you may continue to operate your business, but your creditors and the court must approve a plan to repay your debts. There is no trustee unless the judge decides that one is necessary; if a trustee is appointed, the trustee takes control of your business and property.

If you have already filed bankruptcy under chapter 7, you may be able to change your case to another chapter.

Your bankruptcy may be reported on your credit record for as long as ten years. It can affect your ability to receive credit in the future.

What Is a Bankruptcy Discharge and How Does It Operate?

One of the reasons people file bankruptcy is to get a “discharge.” A discharge is a court order which states that you do not have to pay most of your debts. Some debts cannot be discharged. For example, you cannot discharge debts for–

* most taxes;
* child support;
* alimony;
* most student loans;
* court fines and criminal restitution; and
* personal injury caused by driving drunk or under the influence of drugs.

The discharge only applies to debts that arose before the date you filed. Also, if the judge finds that you received money or property by fraud, that debt may not be discharged.

It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt, for example, it is possible the debt will not be discharged. The judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a court order.

You can only receive a chapter 7 discharge once every eight years. Other rules may apply if you previously received a discharge in a chapter 13 case. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement (see below) or any other kind of document to do this.

Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car). You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.

What Is a Reaffirmation Agreement?

Even if a debt can be discharged, you may have special reasons why you want to promise to pay it. For example, you may want to work out a plan with the bank to keep your car. To promise to pay that debt, you must sign and file a reaffirmation agreement with the court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law. Reaffirmation agreements–

* must be voluntary;
* must not place too heavy a burden on you or your family;
* must be in your best interest; and
* can be canceled anytime before the court issues your discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time.

If you are an individual and you are not represented by an attorney, the court must hold a hearing to decide whether to approve the reaffirmation agreement. The agreement will not be legally binding until the court approves it.

If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.

IF YOU WANT MORE INFORMATION OR HAVE ANY QUESTIONS ABOUT HOW THE BANKRUPTCY LAWS AFFECT YOU, YOU MAY NEED LEGAL ADVICE. THE TRUSTEE IN YOUR CASE IS NOT RESPONSIBLE FOR GIVING YOU LEGAL ADVICE.

Revised 10/05
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5.  What is the difference between a Chapter 7 and a Chapter 13 Bankruptcy?

Chapter 7 is a complete liquidation.  It is designed for individuals and certain companies who do not have the ability to pay their debts. In chapter 7,  the trustee will liquidate any non-exempt property in order to distribute the proceeds to creditors according to the Bankruptcy Code.  Each state allows the debtor to exempt, or protect, certain assets, which the debtor can keep after bankruptcy.  In reality, most debtors do not have significant assets worth liquidating.  But to be sure, contact an attorney at the Chicago Bankruptcy Network to review your assets and exemptions available to you.

Chapter 13 enables individuals with steady income to repay their debts over time, with court protection from their creditors.  Chapter 13 can be used to stop foreclosure of your home, or it may be used to stop your vehicle from being repossessed.  Often, debtors are able to repay their creditors at a discounted rate, depending on their individual situations.  Call a lawyer from the Chicago Bankruptcy Network today to see if Chapter 13 is right for you.
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6.  Can I get a free copy of my credit report?


Yes! Recently, a law was passed which lets everyone receive a free copy of your credit report, at your request, from each credit bureau, once every 12 months. Click the link below to access your free reports now. http://www.annualcreditreport.com

Also, your attorney may be able to help you obtain a merged credit report from all three credit bureaus, for little or no cost to you.  Contact an attorney today at the Chicago Bankruptcy Network.
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7.  How do I fix errors on my credit report?

To correct any errors, you need to notify the credit bureaus of the mistake or inaccuracy.  They will research the issue and contact the company that is reporting the error.  The company has 30 days to respond.  Once the issue is resolved, you are entitled to a 'clean' copy of your credit report.

You may contact the credit bureaus below:

Equifax        www.equifax.com
TransUnion  www.transunion.com
Experian     www.experian.com
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8.  What if I have filed bankruptcy before?

Under the bankruptcy reform in 2005, the bankruptcy code was changed in regards to multiple bankruptcy filings.  This is a complicated section of the bankruptcy law, so be sure to contact an attorney from the Chicago Bankruptcy Network who has studied the numerous changes and can advise you of the options available should you want to file again. 

Generally, a debtor who has previously filed Chapter 7 bankruptcy must wait eight years from the previous Chapter 7 Bankruptcy before they can file another one. Also, you cannot get a discharge under Chapter 7 if you had received a discharge under Chapter 13 within the previous 6 years and paid less than 70% of your unsecured debts.  Also, if you are looking to re-file another Chapter 13 after a previous Chapter 13 was dismissed, consult a Chicago Bankruptcy Network lawyer, your rights may be limited.
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9.  What types of debts are non-dischargeable in bankruptcy?

  Several types of debts which are not discharged in bankruptcy include, but are not limited to:

  • most tax debts
  • Alimony, maintenance, or support
  • most student loans;
  • Most fines, penalties, criminal restitution
  • Debts from motor vehicle accidents while intoxicated
  • Unscheduled debts
  • Post-filing debts
  • Parking tickets, moving violations, tollway fines
  • NSF Checks
  • Certain debts to governmental agencies
  • Debts incurred through fraud
  • Recently acquired debts
Contact an attorney at the Chicago Bankruptcy Network to discuss the dischargability of your debts.
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10.   What is a reaffirmation agreement?

A reaffirmation agreement is a signed document between the debtor and a creditor which allows a debt to survive bankruptcy.  The most common occurence is when a debtor wishes to keep their home or car after the case.  If so, the creditor will allow the debtor to do so, but only if the debtor signs a reaffirmation agreement.  It basically keeps the debtor on the hook for the debt.  In exchange, they can keep the item they are financing. 

One change in the bankruptcy code now requires the debtor to show that reaffirming the debt does not impose an undue hardship on the debtor.  The court wants to know you can afford to make the payments.  It is the court's way of making sure you get the fresh start that you deserve.  Your lawyer from the Chicago Bankruptcy Network will also have to sign the reaffirmation agreement, and will make sure you understand all of the terms and requirements involved.
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11.  What are the Illinois Bankruptcy exemptions?

Each state has it's own set of exemptions which allow a debtor to keep certain items or to protect certain amounts of equity in their personal belongings.  The most commonly used exemptions in Illinois are:

  • Homestead: $15,000 for equity in debtor's main residence
  • One Motor Vehicle: $2,400 for one motor vehicle.
  • Personal Injury Awards:  $15,000 of debtor's recovery for personal injury.
  • Wildcard: $4000 to protect household goods, cash, jewelry, etc.
  • Clothing: 100% of regular clothing
  • Qualified Retirement Plans: 100% for IRA, 401(k), pensions
  • Tools of the Trade: $1,500 for tools & equipment used in debtors business.

There are many other more specific exemptions, so contact your Chicago Bankruptcy Network attorney now to utilize the bankruptcy exemptions available to you.
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12.  How much are the court filing fees for bankruptcy?

Currently the Chapter 7 filing fee is $299 and the Chapter 13 filing fee is $274.  This fee is usually separate from your attorney's fees.
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13.  Do I have to take a credit counseling class?

Yes.  Actually there are 2 required classes you have to complete.  The first, credit counseling, informs you of all your options available to you, and advises you if bankruptcy is a good option.  This class can be taken over the phone, over the internet, or in person.  This must be completed before your case can be filed with the bankruptcy court.  Click the link below to go to the list of approved providers in Illinois.

US Trustee approved credit counseling agencies: http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm

After your case is filed, you have to complete a financial management course.  This course will help you get back on your feet, learn to budget your money, avoid the pitfalls that may have lead you to filing bankruptcy, and start help you to re-establish credit again in the future.  This course is also offered in person, by phone or over the internet, and must be completed before your case is over, otherwise you will be denied your discharge.  Click the link below to go to the list of approved providers in Illinois.

US Trustee approved financial management agencies: http://www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm
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14.  What is the means test?

The means test is a new provision of the bankruptcy code.  Basically, it is used to make sure you are a good candidate to file bankruptcy.  It is also used to help calculate what portion of the debts you have to pay back under Chapter 13.

Currently, the means test looks at a debtor's household income received over the six months leading up to the case.  It compares the debtor's average income to the local IRS median income.  If the income is below the threshold, the debtor is  not subject to the means test and the filing is presumed to be made in good faith.  If the debtor's income is above the median income level, the means test analyzes the debtor's monthly expenses compared to the IRS standards.  Then, If the debtor 'passes' the means test, the debtor can proceed with a chapter 7 filing. 

If the debtor 'fails' the means test, it just means that a chapter 7 filing is presumed to be in bad faith.  There are exceptions, and the court can hear any exigent circumstances that would suggest a debtor should be still entitled to a discharge.  Otherwise, the debtor would only have Chapter 13 as a bankruptcy option.
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15.  Will I lose anything if I file bankruptcy?

This is something to discuss with your Chicago Bankruptcy Network attorney.  The attorney will analyze your assets and the exemptions available to protect those assets from liquidation.  Only then will the attorney recommend a Chapter 7 bankruptcy case to you.  However, if you have assets that you no longer want or cannot afford, you may surrender them to the trustee to liquidate them to pay your creditors.  Otherwise, your attorney can prepare a Chapter 13 repayment plan designed to protect all of your assets.  The court does not liquidate any assets under a Chapter 13

You will also be subject to losing financed items to the creditor if you do not sign a reaffirmation agreement with them to keep the debt.  The mortgage company can foreclose on your home if you fall behind, or if you do not sign a reaffirmation.  Likewise, your car company can repossess your car if you do not sign a reaffirmation, or if you fall behind after you sign a reaffirmation agreement.
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16.  Can I stop the creditor calls at home and at my job?

Yes! Your Chicago Bankruptcy Network lawyer will accept all of your creditor calls once you hire the lawyer.  All collection agency calls are required to stop once you tell them you hired an attorney. (Note that the original creditor can still contact you directly until you file, but most will call the attorney if you ask them to.)  Tell any creditor who contacts you at work that you are unable to accept personal calls at work, but to contact your lawyer for any information that they would like to know. 

Your attorney will also be able to stop any voluntary wage assignments that may be sent to your payroll.
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17.  Do I have to file bankruptcy jointly with my spouse?

Although, your spouse is not required by law to file bankruptcy with you in Illinois, it may often be a wise decision to do so.  Your spouse's income and expenses will be factored into the Means Test of your case, even if not filing.  If you have any debts that are joint or cosigned with your spouse, your spouse will still be responsible for those debts.   Also, spouses may still be held responsible for certain debts for family expenses, and medical expenses for children under the Family Medical and Leave Act.  So, it is important to review all of these issues with your lawyer when deciding if your spouse should file a bankruptcy with you.  The filing fee is the same, no matter if it is an individual or a joint filing.
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18.  Who will find out about my bankruptcy case?

The only parties that will know of your bankruptcy are your creditors, your co-signers, the IRS, and the bankruptcy court. Your employer will not find out, unless you owe a debt to your employer, if you are being garnished and need your attorney to stop it once you file bankruptcy, or if you agree to have your Chapter 13 plan payments deducted from your paycheck.  Your bankruptcy is public record, someone would have to know where to search to find this information.
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19.  What are the most common reasons for filing bankruptcy?

The most common reasons for consumer bankruptcy are: unemployment, high medical expenses, over-extended credit, marital problems and other large unexpected expenses.

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20.  Will I ever get credit again after filing bankruptcy?

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.
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