Judge Thorne ruled that a debt for overpayment of a domestic support obligation is not itself a “domestic support obligation,” (DSO), as set out in Section 101(14A) of the bankruptcy code.  Therefore, it is dischargeable in the bankruptcy case.    This was regarding an overpayment of food stamps paid to the debtor who ultimately did not qualify for them.   Judge Thorne admitted a split in case law, and followed the Collier treatise.  She ruled it to be “merely a debt to the government for the return of benefits that should never have been paid . . . and that does not automatically retain any supportive nature that the benefits may have had.”

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So, I figure I’ll sell the benefits of bankruptcy, with Y is for YOU DID IT!
You completed the bankruptcy case.  3 months for chapter 7, and 3 to 5 years for most chapter 13 bankruptcy cases.    So, now what?

It is a good idea to check your credit report a few months after bankruptcy.  This is a new service we are providing for interested clients.  We’ll help to make sure all items are being properly reported.
You worked hard and paid a lot of money to get your credit back on track, so make sure it’s being done correctly.

You should see an increase in your credit score after bankruptcy as well.  My research shows that most credit scores are predicted to jump up 50-100 points in the first year after bankruptcy.  This assumes the debtor doesn’t go crazy and apply for every offer they see!  If the debtor stays on track, pays all of their bills on time, they should see an increase.  

Don’t hesitate to take new debt, but only if you need it.  You’ll get bombarded from tons of companies who gather your info from the bankruptcy filing and send you offers of new credit. Be smart, throw most in the trash.  You’ll notice huge interest rates and tempting offers that aren’t as good once you start reading the small print.

Take out a small credit card.  Use $50 each month on it. But pay off that $50 each month in full, on time as well. That will help your credit score for sure.

My clients are getting credit card and loan offers the first month after the case.  They are getting car notes the first month out of bankruptcy in Chicago as well.  Watch those interest rates and long car notes – 6, 7 years! Yikes!  My clients in the Chicago area who file bankruptcy are also getting mortgages as well within a few years out of bankruptcy.  

Nothing is set in stone, so feel free to seek out the credit, but only if you need it.  Keep your payment history clean, pay your bills on time.  That can take a few years before this has a major positive impact on your credit score, but every month counts.

Make a budget for yourself.  Be honest with yourself as well.  You had to take 2 counseling classes during the bankruptcy process,  use what they have provided to help keep you on track to financial freedom.

Don’t forget, your attorney is a great tool as well to use, to help with issues you may be having.  They are a great source of referrals too, and have many vendors who are bankruptcy friendly if you need a car, a credit card, loan etc.  

Congratulations, you are out of debt and have a fresh start!
www.leederslaw.com
www.chicagobankruptcynetwork.com
www.cookcountybankruptcy.com

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Subject: Filed as individual 3 years ago

Question:
Hi. About 3 years ago I filed chapter 7 as an individual because I wasn’t married. Now i’m married and unfortunately got myself into some more debt. Can I file again because my status has changed or do I still have to wait the 8 years?

Answer:
Hi. Unfortunately, you cannot file chapter 7 bankruptcy again until 8 years from the date you filed previously. Your option at this point is to file chapter 13 bankruptcy, where you can pay back at least a portion of the debt. However, if your previous bankruptcy was filed less than 4 years ago, you would not get a discharge at the end of the chapter 13. You should consider waiting until at least 4 years from the date you filed your chapter 7 bankruptcy, that way, you will get a discharge under the chapter 13 bankruptcy when you complete the debt repayment plan.

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Judgment
Q:
If a Judgment was won against you for a security bond and you file bankruptcy with no real property or income, can that judgment be included in the bankruptcy?
A:
I am not totally familiar with a ‘security bond.’
Most non-dischargeable debts are government related, or based on fraud. Otherwise, most regular judgments from credit cards or medical bills are discharged upon filing. If you let me know what a security bond is, perhaps I can get you more info, Belinda. Thanks

Judgments before bankruptcy
Q:
I filed for Chapter 7 bankruptcy on 3/04/2004 and it was discharged on 6/16/2004. Previous to my discharge one of my credit card companies was granted a judgment against me on 1/29/2004. The judgment is included in my bankruptcy under “Statement of Financial Affairs” but the debt was discharged on Schedule F Unsecured claims versus on the Schedule D Creditors Holding Secured Claims. My question is two-fold can I get this debt taken off public record based on it being discharged and should my attorney have filed this differently?
A:
It really wouldn’t matter if it was on schedule D or F, as long as it was listed. I assume you are looking at your credit report. The fact that you got the judgment will remain as a factual event, however, they should zero it out or otherwise mark that it was under bankruptcy. The creditor can never collect on this. The fact that you had the judgment may remain on your credit for up to 7 years, similar to foreclosure, and bankruptcy will show for up to 10 years on your credit report.

Divorce and Chapter 13
Q:
My wife and I filed a chapter 13 about 4 months ago. We have been marital problems for years and despite marriage counseling have decided a divorce is the best option for all involved parties, including my 5 yr old daughter, to avoid any more emotional damage by staying together in an unhappy home. We were not eligible for Ch. 7 because of income, but now divorce will change this quite a bit. We did file jointly on the Chapter 13. What options do I have to still keep the house as my form of Child support and still have enough money to live on myself? My Ch. 13 was a 100% repay plan. Can I reduce the percentage amounts? Or can I convert to a 7 in order to discharge the debt so that paying my wife child support will be and option. Currently I have a wage deduction weekly to pay the plan as it now stands.
A:
You should speak to both your divorce attorney and bankruptcy lawyer. It is possible to convert the case, or even to split the cases into 2 separate cases if one party wants to convert to chapter 7. You would have to have enough combined monthly expenses to eat up the disposable income on a conversion. There are other budget test and asset protection issues as well, so sit down with your lawyer to map out the best plan of attack.

Can I file bankrupt on a student loan ?
Q:
Can I file bankrupt on a student loan that I received in 2001 with the help of a co-signer?
A:
Hi Shana,
Unfortunately, student loans, more precisely ‘debt for educational purposes’ are generally non-dischargeable, unless you can prove that it is an undue hardship to repay it. To do that, you would have to satisfy the ‘Brunner’ case test: 1. you paid it when you could in the past, you have no present ability to repay it, and you have no future ability to repay.

Therefore, 99% of the time, student loans are non-dischargeable in chapter 7 bankruptcy because of this tough standard to beat them.

bankruptcy
Q:
We filed bankruptcy in sept 2003 after my spouse lost his job. We have struggled till now trying to keep our house. It was sold public auction in May . Are we responsible for the remaining balance and if so can we claim again? If we have to pay back 100,000 we will not even be able to rent the house we are in .

A:
Your answer depends on whether you reaffirmed the mortgage in a chapter 7. It would also depend on if your jurisdiction allows lenders to collect on their deficiency balances.

If you did not reaffirm the debt in the chapter 7, technically it is discharged in that case if you listed it in the petition.

You would only qualify for Chapter 13 if your prior chapter 7 was less than 8 years ago.. Chapter 13 is a debt repayment plan

chapter 13
Q:
I am in a chapter 13. I am about to be discharged but I have not turned over my last 3 years tax returns or refunds. I have been informed by the Trustee that if I do not turn over the tax refunds my case will be dismissed. What does it mean when they dismiss your bankruptcy?

A:
It means that your creditors can collect from you. If you, let’s say, paid in 10% to your unsecured creditors, they can come after you for the other 90%.
You should submit the items to the trustee to get the benefits of your bankruptcy filing.

Follow-up:
What if I do not have the money? Is there something I can do?

A:
You need to discuss the issue with your lawyer. In Illinois, debtors do not usually have to pay their tax refunds to the trustee. Therefore, discuss with your lawyer what repayment options you may have. Perhaps they can extend the case to compensate for that money.

Garnishment/Freeze placed on account a year and half after bankruptcy discharged
Q:
I live in the state of Georgia. I filed chapter 7 in October of 05 My bankruptcy was discharged in January 2006. On July 10, 2007 an attorneys office placed a freeze/garnishment on my checking accounts. I confirmed with the credit card company that this was covered in my bankruptcy. The original debt with the credit card company was a little over one thousand dollars. This attorney placed a garnishment of over THIRTY THOUSAND dollars on my checking account and placed a lien on my home. How they came up with that amount, your guess is as good as mine. This freeze on my checking account has left me with no way of paying my bills (even though I have the money, just can’t touch it) and has left me unable to go to the grocery store to feed my family of 6. My bank also notified me that because of the freeze on the account any checks that I have written will be returned as non sufficient funds. Which will cause me a lot of money. My bank charges 33 dollars for each NSF charge. Plus what ever each store decides to charge me for the “bad” check. What are my rights and what can I do to this clear case of contempt of court? Can I sue them for damages? Can I sue them for the cost of having a lawyer reopen my bankruptcy case? Any information would be greatly appreciated.
Thank You,
Michelle

A:
You probably do not have to reopen the bankruptcy case. Assuming that you listed this debt in the case, it sounds like you may have a potential state court action for a violation of the bankruptcy discharge. You should contact your bankruptcy attorney for the process…he or she may be able to contact the attorney to get them to lift the hold without having to bring a lawsuit.

Question about selling a store before/after the bankruptcy
Q:
Hi.
I am trying to file a bankruptcy(Ch 13 I think because I am trying to keep some assets I need). I have a primary work, and there is a store(mini mart running slow) under my name run by my parents. If I file ch 13, and if My parents sell the store, will those assets go to trustee 100%? we started the business with around 50K, and we are trying to sell it higher(hopefully). So say If we sell it as 80K, will those 30 difference go to trustees 100%?
2. I have filed the tax with my wife jointly, will she bee effected when I file a ch 13 ? I didn’t join anything with her other than the tax filing.

Please help!!!

A:
Hi Song,

All of your assets, that are in your name need to be disclosed in a bankruptcy case. Any transfers or sales need to be approved by the court and trustee. In most cases, any unexempt proceeds (ask your bankruptcy lawyer for specifics) would normally be paid to the trustee towards your chapter 13 plan.

You would file taxes like you normally do, there is no special bankruptcy exemptions that you would have to worry about.

Foreclosure and Bankruptcy
Q:
We have a 1st, 2nd, and 3rd mortgage and can no longer afford the house. Our income is too high for chapter 7 and we most likely would file chapter 13. If we surrender the house during BK, is this considered a foreclosure? Finally if the bank sells the house and it does not sell for the total amount owed, will the remaining unpaid balance be rolled into our payment plan or will it be discharged by the judge?

A:
Usually, the bank will foreclose, but the chapter 13 bankruptcy will trump it, discharging any further liability on the claim if you set up your plan correctly. Therefore, you should speak to an experienced chapter 13 bankruptcy attorney to help assist you.

Selling a home in bankruptcy
Q:
My mother and I own a home I am primary on the mortgage. I just sold the home and purchased a new one in my name. My mother filed bankruptcy back in Jan 2007. I have a closing date on the home I own w/ Mom and the buyers closing atty called and said we have to get permission from the court to sell the home. My Mom has contacted her atty’s office but cannot get past the paralegal who says this could take 8 to 10 weeks to get to court. Is there a faster way to get permission to sell the home. My mother will not receive any money from the sell and she is paying the court monthly on her bankruptcy. The closing is scheduled in 3 weeks. HELP!
A:
Hi Dana,

Mom would need to bring a motion in bankruptcy court to obtain permission to sell the home. The notice period is 20 days, so realistically should take about a month to be heard in court. You will need to contact your real estate attorney and advise them that they may need to extend the closing date. Hope that helps.
Thanks.

Thanks for reading the Q&A for bankruptcy. Keep in mind, state law applies, and I am only licensed in Illinois, so my answers are based on Illinois case law. You should always seek out a local bankruptcy attorney to answer your case specific questions. Thanks

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