Frequently Asked Questions About Bankruptcy


Please find below a list of frequently asked questions about bankruptcy.  Clients typically have many questions, so our firm has attempted to address as many of those common questions as possible here.  If you have any other questions, please contact us.  Bankruptcy should be a personal and straightforward process, and our firm strives to accomplish that for our clients, unlike so-called "bankruptcy mills" (see below).


Q:     What is the typical bankruptcy process?


A:     To start, you should always meet with an attorney to discuss your options.  You'll be asked to provide information regarding your finances and debts, so your attorney can prepare bankruptcy documents for you.  After reviewing the paperwork with you, I would file those documents with the Bankruptcy Court.  Before filing, you must complete a credit counseling course -- in person, online, or by phone.  Our office can help you with that.  At that instant time of filing, creditors are to stop calling, knocking on your door, garnishing wages, or taking you to court. 

         You are required to attend a "Meeting of Creditors," commonly known as a 341 hearing.  At that hearing, before the Bankruptcy Trustee, you are required to prove your identity (Driver's License/ID Card and Social Security Card, or W-2, or Medicare card).  You're asked questions by the Trustee to verify the information contained in the paperwork we reviewed and filed.  I attend all such hearings, so you are not alone.

         After the hearing, the only other thing to attend to would be to complete the debtor education course, which is required to receive a discharge of debts.  This may be done in person, over the phone, or online.  Our office can provide you with more information.

         About 8 weeks after the 341 hearing, you would receive a notice from the Bankruptcy Court stating that your debts have been discharged.  Keep this notice of discharge in a safe place. 


Q:    Will I lose my home?


A:    Probably not, if you are current on your mortgage payments.  Illinois provides for retention of up to $15,000 in equity in a residence; this amount is increased to $30,000 for married persons jointly owning a residence.  If you are behind on your home payments, and intend to keep your home, a chapter 13 bankruptcy may be an option to accomplish your goals.  Your attorney will discuss these options with you.


Q:    Will bankruptcy stop a foreclosure lawsuit?  Can I keep my home, even if I am behind?


A:    A chapter 7 bankruptcy will temporarily halt any foreclosure proceedings, but cannot stop those in the end, unless the bank agrees to settle.  (Our firm negotiates with banks).  A chapter 13 bankruptcy will stop a foreclosure, by proposing a payment plan to the court whereby you repay any arrearage over a lengthy period of time. A chapter 13 bankruptcy can stop a foreclosure or tax sale, as long as it is filed before the sale date.  During the proposed payment plan, you are required to continue making the normal mortgage payments.


Q:    My house is in foreclosure.  What are my options?


A:    You could file a chapter 13 bankruptcy, forcing the bank to accept the amount in arrears over a period of up to five years.  There are also State law defenses to stall foreclosures, and loan modifications which could bring you current again.  Please contact our office for a consult so we can assess the particulars of your situation.


Q:    Will I lose my car?


A:    Unlikely.  Illinois allows a debtor to keep $2,400 of equity in a motor vehicle, and also allows a debtor to claim up to $4,000 in any property as protected from seizure by creditors.  Since may people owe more on their vehicles than what those vehicles are worth, there would be no equity interest to protect anyway.  If you are behind on your car payments, however, the creditor could seek repossession of the vehicle.


Q:    My car was repossessed! How can I get it back?


A:   Bankruptcy, under chapter 13, could help.  In Illinois, if a chapter 13 bankruptcy is filed within 21 days of the vehicle's sale date, the vehicle should be returned to you.  Any amounts you were behind on the payments would have to be made up, although over a generous period of time and possibly at greatly reduced interest.


Q:    I owe a lot more for my car than what it's worth.  What an I do about it?


A:    You have several options.  If you want to give up the vehicle, and its associated debt, you could discharge that debt in a chapter 7 bankruptcy.  If you want to keep the vehicle, you could pay today's fair market value for the vehicle, in a lump sum, in a chapter 7 bankruptcy, and keep the vehicle.  Otherwise, you could pay today's fair market value for the vehicle, at reduced interest, over a period of years in a chapter 13 bankruptcy.


Q:    I've been sued by a creditor and have a court appearance coming up.  What can I do?


A:    If you file for bankruptcy, that would halt any further court proceedings.  However, you could also go to the hearing and ask the court for a "continuance," because you need time to find an attorney or get your bankruptcy case on file.  Typically, courts will allow 30-60 days of postponement for such reasons.  If you do not go to the hearing, the court will likely enter a judgment against you -- which may have serious legal consequences.  You should seek an attorney well before your court hearing, if possible, and bring any information related to that court proceeding so that your attorney can advise you in an informed manner.


Q:    I owe the utility company a lot of money and received a shut-off notice.  What can I do?


A:    You could pay the utility company what it demands to maintain service.  Or, you could file for bankruptcy.  The utility company could insist on a small deposit -- usually a few hundred dollars -- but would not be able to turn off your power or other services.  Any amount previously owed to the utility company would likely be discharged in bankruptcy.


Q:    How long will bankruptcy appear on my credit report?


A:    Generally, credit reporting bureaus seem to report chapter 7 bankruptcies for 10 years, and chapter 13 bankruptcies for 7 years.  However, the fact of a bankruptcy on your credit report does not mean you will not be able to regain a positive credit rating.  Once your current debts are wiped out, lenders know you have more income available to repay future debts, and clients have reported to me that they have obtained credit cards and car loans shortly after filing for bankruptcy.  Bankruptcy does not seem to have the stigma it once had, years ago.


Q:    Will my name be published in the newspaper if I file for bankruptcy?


A:    I have never seen a client's name published in a newspaper because he or she has filed for bankruptcy.  The only bankruptcies I have seen in the news are those belonging to influential business people or people involved in scandals.  While all bankruptcy filings are public records, it takes time, determination, and money to actually access those records.


Q:    I am married.  Can I file for bankruptcy by myself?


A:    Yes.  Either spouse can file independently.  If you have medical debts incurred while you were married, you may want to file together, as in Illinois, medical debts incurred while married are collectible against either spouse.  You should consult an attorney for your specific situation.


Q:    My partner and I have been civilly united / married in Illinois (or another state).  Can we file a bankruptcy together?


A:    Yes and no.  If you were married, then the recent Supreme Court ruling would indicate that both spouses could file bankruptcy together, just as any married couple.  On the other hand, if you were united under a civil union procedure, that is unclear.  However, Brian has filed bankruptcy for a couple united in a civil union, with good results.  Everybody is entitled to the same benefits under our country's laws, and Brian will fight for your rights, if need be.


Q:    I have student loans -- can I file bankruptcy to get rid of student loan debt?


A:    Not usually.  Unfortunately, Congress has written the bankruptcy laws, and judges have interpreted those laws, to make discharge of student loans through bankruptcy very, very difficult.  Generally, one must show the court that repaying the loans would present an undue hardship, that one has made a good faith attempt to pay in the past, and that your dire financial situation is likely to continue for a significant period of time.  If you feel any of these may apply to your situation, please consult with my office.  Very few attorneys handle these sorts of cases, but our firm does.  Discharging a student loan involves filing a separate lawsuit against the lender.  The attorney handling your student loan discharge issue need not be the same attorney who filed your original bankruptcy case.  Contact our office for more information.


Q:    I owe the Internal Revenue Service (or the Illinois Department of Revenue).  Can that kind of debt be discharged in bankruptcy?


A:    It depends.  If one has tax debt more than three years old, and tax returns were actually filed on time, then there is a good chance such taxes could be discharged in bankruptcy.  If not, or if the taxes were employment-related (941) taxes, then those could be addressed in a chapter 13 bankruptcy or through negotiations with the I.R.S.


Q:    I filed for bankruptcy, and a creditor has continued to contact me to collect payments?


A:    While some bankruptcy firms may not take this seriously, our firm does.  Creditors are not allowed to contact you at all to collect debts once you file for bankruptcy.  If this happens, provide the creditor with your bankruptcy case number, and then contact me at once.  Keep documentation of when the creditor called or contacted you, the phone number called from, and the person you spoke with; keep anything sent in the mail, with the envelope.  If the contact is improper enough, the court is allowed to impose sanctions, including monetary damages, against such creditors.  I have pursued many creditors for this conduct, and received money for clients for their undue hardship caused by creditor harassment.


Q:    I filed for bankruptcy, and a creditor has filed an adversary case against me claiming its debt should not be discharged.  What can I do?


A:    SEEK AN ATTORNEY IMMEDIATELY.  Not all bankruptcy attorneys handle these kinds of matters, but our firm does.  If you receive an adversary notice against you, there are relatively short deadlines that must be followed.  Find an attorney (it does not need to be the attorney that filed your bankruptcy) in order to protect yourself. 


Q:    I have multiple credit cards trying to collect, but I do not want to (or can't) file for bankruptcy.  What can I do?


A:    I can negotiate settlements with the credit card companies for a reduced price.  They may insist on lump sum payments of 25-75% of the total owed in exchange for forgiveness of the remaining debt.  Debts discharged in bankruptcy are not taxable as income, but debts reduced and settle by lenders may well be taxable as income.  Please call or email to discuss these issues further.


Q:    What is a bankruptcy "mill?"


A:  We are not a bankruptcy "mill."  A "bankruptcy mill" is term used for a bankruptcy firm, often with many offices, that files a large number of cases with little personal attention to clients.  These firms are notorious for advertising a flat fee, then charging extra for anything that might be required by the client's needs, and not refunding money paid should the clients change their mind.  These mills are more like factories in that clients become little more than a case number.  When clients have court hearings, they may have no idea who is there to represent them, or if that person has actually reviewed their file before the hearing.  Clients may primarily be handled by assistants without legal education of any kind, and find it difficult, if not impossible, to contact their own attorney about their case.  Once a client's case is discharged, a mill typically throws the client's file into storage, difficult to be found again should the client need sanctions against creditors, or other ongoing assistance.


The Brainard firm treats bankruptcy clients much differently.  You have a right to meet with an attorney at every step of the way.  You have the right to contact your attorney, whatever your question or concern, and here, you will be responded to by an attorney in a timely manner.  An attorney is present at the firm five days a week, and often on weekends via email, unlike bankruptcy mills that have someone, perhaps (or maybe not) an attorney, present maybe a day or two each week in a cramped, rented space in your town.


Just because you are considering bankruptcy, does not mean you should feel degraded in any way.  You don't deserve second-rate representation. You deserve the same high level of competence from an attorney as any other legal client would expect to receive.  Some firms just want to make a buck.  At Brainard Law Offices, we want to earn our money by providing quality, compassionate, and expert service to our clients.  Contact our office for a free consultation.  


Bankruptcy - Frequently Asked Questions

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