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Serial Bankruptcy Filers Held Accountable in CourtOne of the advantages that debtors gain by filing for bankruptcy is putting a stop on debt collection and property repossession efforts by creditors. By using bankruptcy, debtors often pay less than what they actually owe and discharge their remaining debts afterward. Some debtors abuse the process by being serial bankruptcy filers. Bankruptcy laws require filers to waiting a certain number of years before they can discharge their debt again. Serial filers try to continuously delay creditors’ debt collection actions by repeatedly filing for bankruptcy without ever completing a case. Debtors who attempt to defraud creditors through serial bankruptcy can face criminal charges.

Recent Example

In the case of United States v. Williams, the defendant was convicted on five counts of bankruptcy fraud for using repeated bankruptcy filings to prevent debt collection efforts by her condominium association. The defendant had fallen behind on payments to several creditors, including fees she owed to the condominium association. As part of the scheme to avoid debt collectors, the defendant would:

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Four Ways to Present Reaffirmation Agreements During BankruptcyOffering a reaffirmation agreement to a debtor going through Chapter 7 bankruptcy can allow a secured creditor to receive close to full value on debts for real and personal property. As part of a Chapter 7 debt discharge, a secured creditor normally repossesses properties if a debtor will be unable to repay the loan. However, the creditor most likely cannot hold the debtor liable for any deficiency after resale of the property. With a reaffirmation agreement, the debtor keeps the property as long as he or she can continue making payments. If the debtor defaults, the creditor can repossess the property, and the debtor would be liable for any deficiency after resale. Knowing the risk this may pose their clients, bankruptcy lawyers will discourage debtors from signing reaffirmation agreements. Creditors need to inform debtors of why a reaffirmation agreement may be to their advantage:

  1. Property Importance: Some collateral property during a bankruptcy has greater value to a debtor than others. A debtor may be more eager to hold onto real estate and personal vehicles than luxury items. Thus, debtors will be more receptive to proposals that allow them to retain possession of important properties.
  2. Realistic Plan: A court will reject a reaffirmation agreement that puts an undue burden on the debtor. Debtors must also be current on their debt payments in order to enter an agreement. Creditors should understand whether debtors will have the financial means to make payments after bankruptcy. If a debtor does, the creditor can explain why it is reasonable to reaffirm the debt.
  3. Short-Term Debt: In some situations, the remaining debt on an agreement may be small enough that the debtor could repay it in a year or less. Offering short-term repayment plans that allow them to keep their properties may be more palatable to debtors.
  4. Modifying Loan: The debtor may need an extra incentive in order to reaffirm a debt. The creditor can present an agreement that lowers the burden on the debtor by reducing the monthly payments or interest rates. A better deal may entice a debtor to reaffirm.

Reaching an Agreement

Debtors must state their intention to reaffirm debts before their debts are discharged during Chapter 7 bankruptcy. Though either party can file a reaffirmation agreement, creditors are most often the ones to initiate the discussions. Reaffirmation agreements must be filed within 60 days after the first meeting of creditors. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can help you negotiate a reaffirmation agreement with your debtor. Schedule a consultation by calling 312-704-0771. 

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Six Reasons to Object to a Chapter 13 Bankruptcy PlanWhen facing bankruptcy, some debtors prefer filing for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. A well-constructed Chapter 13 repayment plan can prevent property foreclosure and repossession while clearing the filer of debt obligations. Creditors can benefit from Chapter 13 bankruptcy, as well, but only if the debtor creates a fair and reasonable plan. Creditors must examine repayment plans for possible objections before the plan reaches its confirmation hearing. Failing to object in time allows an unjust repayment plan to become legally enforceable. There are several objections that a creditor can make before the plan is confirmed:

  1. Understated Debt: A debtor’s proposed repayment plan may exclude certain debts that he or she is required to repay. Priority debts must be part of the repayment plan. Mortgage and auto payments may also need to be included if the debtor wants to keep the related properties.
  2. Insufficient Payments: Unsecured creditors must receive compensation from the repayment plan that is at least equal to what they would have received by liquidating properties in Chapter 7 bankruptcy. This is the tradeoff that debtors must make in exchange for keeping those properties.
  3. Withholding Disposable Income: Plan payments must use whatever income is left over after necessary living expenses and other financial obligations. Some debtors will try to hide how much money they make so they do not have to repay as much of their debts.
  4. Unsustainable Payments: A repayment plan should be based on what the debtor will realistically be able to afford. The plan may fail if the debtor cannot prove he or she will have the income to maintain those level of payments.
  5. Unqualified Debtor: A debtor is allowed to file for Chapter 13 bankruptcy only if he or she meets certain requirements. The debtor does not qualify if he or she has insufficient disposable income, is behind on income tax payments or has debts that exceed the legal limit.
  6. Bad Faith Plan: The debtor must be honest and fair with his or her creditors when creating a repayment plan. Any evidence that the debtor tried to deceive his or her creditors may terminate the plan.

Outcome

If the court upholds your objection, the debtor will have to revise the plan or abandon filing for Chapter 13 bankruptcy. The debtor may still be able to file for Chapter 7 bankruptcy if he or she does not qualify for Chapter 13. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can identify objectionable aspects to a debtor's bankruptcy repayment plan. To schedule a consultation, call 312-704-0771.

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Bankruptcy Law Allows Debtors to Continue Retirement ContributionsA Chapter 13 bankruptcy trustee in Illinois recently objected to a debtor’s request to exclude $200 per month from his disposable income in order to contribute to his 401K retirement plan. The trustee questioned the motivation of the decision because the debtor had not made any contributions to the plan in the six months prior to filing for bankruptcy. However, an Illinois bankruptcy court denied the objection, stating that the debtor was within his rights. The ruling shows how bankruptcy courts treat retirement plan contributions as a protected expenditure.

Chapter 13 Plans

As opposed to Chapter 7 bankruptcy, Chapter 13 bankruptcy involves creating a repayment plan instead of liquidating assets. Qualified debtors must submit documents that detail their:

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Involuntary Bankruptcy Useful in the Right SituationsDebtors who lack the means to repay creditors protect themselves by filing for bankruptcy. They can liquidate assets or create reorganization plans, after which their remaining debts may be discharged. Though creditors may be unable to retrieve their full debts, they are often forced to cooperate with the debtor in the bankruptcy to retrieve what they can. However, creditors have the ability to initiate bankruptcy with uncooperative debtors. Involuntary bankruptcy is a lesser-used debt retrieval method because it only benefits creditors in certain situations.

Filing for Involuntary Bankruptcy

There are several requirements when using involuntary bankruptcy against a debtor:

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