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Recent Blog Posts
How Should a Creditor Respond to a Proposed Chapter 13 Repayment Plan?
Creditors need to be able to recover the money owed to them by debtors. Unfortunately, when a debtor files for bankruptcy, a creditor may not be able to recover the full amount owed. However, creditors may receive some payments during the bankruptcy process, and the amount they can receive will depend on the type ofbankruptcy filed. In a Chapter 13 bankruptcy, a debtor will propose a repayment plan in which they will make ongoing payments over a period of three to five years, and these payments will be distributed among their creditors by the bankruptcy trustee. In these situations, creditors will need to understand how to respond to a debtor's proposed repayment plan and the steps they can take to protect their financial interests.
Steps Creditors Should Follow During a Chapter 13 Bankruptcy
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Read and review theproposed plan thoroughly - It is important for a creditor to examine the proposed Chapter 13 repayment plan carefully. The repayment plan should include detailed information about how much the debtor will pay, how frequently they will do so, and the duration of the plan. A creditor should ensure that the proposed plan complies with the rules and regulations governing Chapter 13 bankruptcy while also ensuring that the plan is accurate and realistic based on the debtor's income and expenses.
When Can Creditors Use Lift Stay Motions in Bankruptcy Cases?
When a person or business files for bankruptcy, an automatic stay is imposed to protect their finances and ensure that they will not experience additional losses due to creditors' attempts to collect debts. While the automatic stay is in effect, creditors are not allowed to make any collection efforts, including calling or otherwise contacting a debtor, sending bills or notices, filing lawsuits, collecting judgments, foreclosing on a home or other real estate property, or repossessing a vehicle or equipment. However, there are some situations where creditors may believe that they could experience significant losses due to actions taken by debtors during the bankruptcy process, and they may be able to file a motion to lift the automatic stay, giving them the ability to collect what is owed to them. It is important for creditors to understand how lift-stay motions are handled in bankruptcy cases.
UPDATE: Using Non-Wage Garnishment to Collect Debt
Originally published: April 19, 2017 -- Updated: May 15, 2023
Update: As described below, there are options available for creditors who need to collect debts from debtors who have limited income that may be recovered through wage garnishment. However, it is important to understand what limits may apply to the amounts that can be garnished from a debtor’s wages. This may help creditors determine what avenues to pursue when collecting debts following a legal judgment against a debtor.
Illinois law states that one of the following methods may be used to determine the amount that can be deducted from a debtor’s wages:
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Multiply a person’s gross weekly wages by 15 percent. This is usually the maximum amount that may be garnished from a person’s wages.
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Determine how much of a person’s disposable earnings in a week exceed 45 times the minimum wage. Currently, the minimum wage in Illinois is $13.00 per hour, and $13.00 times 45 is $585.00. This amount may be deducted from a person’s net wages after taxes and mandatory deductions have been taken out to determine the amount that may be garnished.
5 Types of Loan Modifications Creditors May Negotiate With Debtors
There are a variety of situations where creditors may need to deal with borrowers who have defaulted on loans or are struggling to make payments. While there are many debt collection options available to creditors, it can sometimes be beneficial to work with a debtor to find solutions that will allow them to continue making ongoing payments. Loan modifications may involve changes to a lending agreement that will make it easier for the debtor to adhere to the terms of repayment. By understanding the different types of loan modifications that may be available, creditors can take steps to protect their financial interests.
Options for Modifying Loans
To address delinquent loans or defaults, creditors may reach agreements with debtors that may include:
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Forbearance - A creditor may agree to suspend or reduce a debtor's monthly payments for a specific time period. This can be a good option for borrowers who are experiencing temporary financial difficulties due to unexpected changes in their lives, such as health issues, job loss, or divorce. However, forbearance is not a long-term solution, because the debtor will be required to resume payments at some point in the future. The missed payments may be added on to the end of the loan term, or future payments may be temporarily increased, and this may mean that the borrower will owe more in the long run.
How Can a Creditor Protect Their Rights During a Foreclosure?
When debtors default on mortgage payments and fail to pay what is owed to a lender, foreclosure proceedings may be necessary. The foreclosure process can be lengthy and confusing, and it is important for mortgage lenders or other creditors to understand their rights and responsibilities. By taking steps to protect these rights and resolve any issues that may arise during a foreclosure, a creditor will be able to minimize their losses and recover as much of what is owed to them as possible.
Issues to Address as a Creditor During a Foreclosure
Creditors, including primary mortgage lenders, mortgage servicers, and second mortgagees, can protect themselves during foreclosures by doing the following:
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Follow the law - It is important for creditors to follow all applicable laws and regulations throughout the foreclosure process. Depending on the type of loan, there may be specific notice and filing requirements, mediation procedures, and other legal requirements under state law. Failure to follow these requirements can result in delays or even dismissal of the foreclosure. An attorney can provide guidance on the laws that apply in a specific situation, and they can help address any legal issues that may arise during a foreclosure.
Protecting Creditors’ Rights When Negotiating Settlements With Debtors
Creditors have certain rights when it comes to collecting debts owed by debtors. While there are a variety of debt collection options available, there are some situations where it may be beneficial for both creditors and debtors to negotiate settlements that allow a debtor to pay less than the full amount owed to a creditor. In these situations, it is important for creditors to know how to protect their rights and ensure that any settlements reached with debtors are fair while protecting the creditor's best interests. By understanding the potential strategies that may be used when negotiating settlements with debtors, creditors can take steps to minimize their financial losses and ensure that settlements can be completed successfully.
Staying Up-to-Date on the Law
Creditors must be sure to understand all applicable laws and regulations that apply to debt collection. This includes staying aware of changes in local, state, and federal laws that may affect the way creditors can collect debts owed to them. Creditors should also be sure to understand the legal limits regarding how much a debtor can be required to pay, as well as any regulations that may play a role in the negotiation process. Understanding these laws can give a creditor an advantage during negotiations and help ensure that they are not taken advantage of.
How Can Creditors Avoid Violations of the Fair Credit Reporting Act?
The Fair Credit Reporting Act (FCRA) is a federal law that establishes rules and regulations for the collection, maintenance, and use of consumer credit information. This law was designed to protect the privacy of consumers and their credit information. It requires creditors to treat consumer credit information with care, accuracy, and responsibility. If a creditor fails to abide by these laws when collecting debts or taking other actions, they may face serious legal consequences.
Understanding Creditor Requirements Under the FCRA
The FCRA governs how creditors must handle consumer credit reports, as well as any other information related to a consumer’s creditworthiness. For example, it requires that any creditor who obtains a consumer’s credit report must have a “permissible purpose”—which means they must be able to show that there is a legitimate business reason for obtaining the report. It also restricts creditors from reporting inaccurate or outdated information about consumers and requires them to provide consumers with access to their own files if requested.
What Options Are Available to a Creditor When Repossessing a Vehicle?
Repossession of a vehicle is an effective way for auto lenders to recoup losses in the event that a customer has not been able to meet their contractual payment obligations. However, when a creditor repossesses a vehicle from a borrower, it can be a tricky and uncertain process. Creditors need to be aware of their legal rights and the options available to them in these situations.
Due Process Requirements
The first step for any creditor is to familiarize themselves with the due process requirements in their state. Creditors may have certain duties they are required to fulfill before they can legally repossess a vehicle. In some states, a creditor may be required to provide written notice to the borrower, informing them of their right to cure the default. However, Illinois law does not require a creditor to notify a debtor prior to proceeding with a repossession. If necessary, creditors may still contact debtors to notify them of missed payments and inform them of the consequences of defaulting on a debt.
How to Protect Creditors’ Rights When a Debtor Declares Bankruptcy
Creditors have a right to take all reasonable measures to recover debts owed to them. However, debtors are also afforded with certain protections, and they may take steps to eliminate the requirement to pay certain debts by filing for bankruptcy. When a debtor declares bankruptcy, creditors should take the appropriate steps to protect their rights and determine how they can minimize their losses. The steps creditors can take in these situations include understanding the relevant provisions of the U.S. Bankruptcy Code, determining how different types of bankruptcy will affect creditors’ rights, contacting a bankruptcy trustee to discuss their rights as a creditor, paying close attention to any documents they receive from court officials or trustees, taking full advantage of all available remedies under state and federal law for recovery of their claims, and remaining in contact with their attorney throughout the bankruptcy process.
Read Our Top 10 Debt Collection and Creditors’ Rights Blogs for 2022
With the changing laws and regulations surrounding debt collection rights, keeping up with the latest developments can be a challenge for creditors. At Dimand Walinski Law Offices, P.C., we are dedicated to representing creditors in debt collection matters, and we also regularly publish blogs to help keep creditors informed of the relevant issues that may affect them. We wanted to highlight the top 10 blogs that visitors to our site read in 2022:
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What Are the Statutes of Limitation for Debts in Illinois? - This blog looks at the time limits that apply to creditors who are seeking to collect unpaid debts. We updated this blog in 2022 to provide more information about the procedures that creditors will need to follow to pursue judgments against delinquent debtors.
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Illinois Suspends Vehicle Repossession by Auto Lenders - In 2020, the state of Illinois took action in response to the COVID-19 pandemic to prevent creditors from repossessing vehicles from delinquent debtors. We provide information about how this order affected creditors, including updates about the options that may be available after the order expired.
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