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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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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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How Bankruptcy Affects Debt CollectionBankruptcy is one of a debtor’s most powerful tools to avoid paying off debt owed to a creditor. If granted bankruptcy, debtors may be able to absolve themselves from responsibility for some of their debts. When a debtor files for bankruptcy, the court can place an automatic stay on the creditor’s debt collection efforts until it decides on the bankruptcy case. Creditors can object to the automatic stay or the bankruptcy claim. Creditors have two types of bankruptcy they most often deal with, each having a different effect on their ability to collect debts.

Chapter 7

Chapter 7 bankruptcy is considered favorable for debtors who do not own many high-value assets. In order to qualify for this form of bankruptcy, the debtor:

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