Many American Debtors are Too Poor to File Bankruptcy

Many American families are too poor to file for bankruptcy, according to a recent article in CNNMoney.  Hefty filing fees may be preventing struggling consumers from taking the difficult, yet increasingly important, step toward getting out from under their crushing debt.  Recent research submitted to the National Bureau of Economic Research shows that the average cost to file for Chapter 7 bankruptcy protection is more than $1,500.  Those of us working in Chicago bankruptcy law know that making the decision to file for bankruptcy is never easy.  It can be difficult to admit you need help, but our attorneys are here to answer your questions, as well as to assist you as you consider all of your options. 

Why is filing for bankruptcy so expensive, potentially prohibitively so, for the people in the most need?  The answer is the cost of filing for bankruptcy has risen significantly in recent years due to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.  The law tacked on extra requirements to the filing process, including additional paperwork and consumer credit counseling and debtor education, many of which cost debtors.

The numerous fees involved in filing bankruptcy are making it tougher for lower-income individuals to take advantage of Cook County bankruptcy.  For example, it costs about $300 to file bankruptcy paperwork in federal court.  In addition, there are fees for the mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course, which cost about $85 altogether.  The higher fees correspond with the additional paperwork that is now necessary due to the changes in the law.  Bankruptcy cases can be complicated, and the changes make it even more crucial to consult a competent professional. 

According to CNN Money, the rising cost of bankruptcy filing will cause between approximately 200,000 and 1 million consumers to be unable to afford to file this year.  The National Bureau of Economic Research found that the bankruptcy rate has fallen slightly since the Bankruptcy Abuse Prevention and Consumer Protection Act took effect, but the average income of bankruptcy filers has increased.  Thus, consumers who are better off or middle class are more likely to be able to file, rather than lower-income debtors who may need it the most.

The attorneys at the Emerson Law Firm frequently handle Chapter 7 bankruptcy proceedings.  Chapter 7 bankruptcy is the most common form of consumer bankruptcy.  It allows consumers to consolidate student loans, protect loan co-signers, or eliminate credit card debt.  However, not all debt is dischargeable through bankruptcy, so it is important to consult a professional before you file.  For instance, student loan debt is not currently dischargeable, though the issue is being hotly debated.  There are also tax consequences related to filing for bankruptcy, so those most be carefully considered as well.  Our Oak Park bankruptcy lawyers have handled many bankruptcy proceedings and know how to successfully navigate the legal system.  For example, bankruptcy lawyers know you can request to have the $300 court fee waived if you are filing for Chapter 7 bankruptcy.  To be eligible, you must meet certain income and financial requirements, however, so, again, it is important to discuss your bankruptcy case with a qualified professional.

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High-Fee Credit Cards Target Consumers with Poor Credit Histories

Recently, we explained that the Supreme Court ruled that binding arbitration clauses in credit card agreements are permissible, making it harder for consumers to challenge lenders in courts.  In fact, the Supreme Court’s decision all but ensures that a significant number of consumers will lock themselves into such agreements without realizing they cannot sue their credit card companies in court.  Compounding this setback for consumers, the Consumer Financial Protection Bureau is now proposing the reversal of a ban on exorbitant credit card sign-up fees. 

 

Those of us working in Chicago bankruptcy law know that many consumers in the greater Chicago area and across the country are still struggling.  Unfortunately, at least some of the current economic recession is due in part to poor choices made by those in the financial industry.  Many big banks were bailed out, and a number of predatory lending practices have been exposed.  Yet our Oak Park bankruptcy attorneys know that unscrupulous lenders may still prey upon consumers if our legislators do not remain vigilant.

According to an article in The Washington Post, the high credit card fees target consumers with poor credit histories.  The high-fee credit cards are known as “fee-harvester cards” because they typically have low credit limits, but high fees and interest rates, sometimes up to 36%.  Consumers trying to rebuild their credit histories with high-fee credit cards (likely because it is difficult to obtain approval for other cards) could actually cause their scores to plunge even further.

Three years ago Congress attempted to curb high-fee credit cards as part of a plan to address abuses by the credit card industry.  Congress wanted to cap the fees a credit card issuer could charge at 25% of the card’s limit during its first year of use.  So, for example, a card with a $300 credit limit would have a $75 annual fee.  However, such high-fee cards also come with a large up-front fee—e.g. $95 to open the account—which lenders can legally charge because the fee is imposed before the account is opened, thus circumventing the cap required by Congress.  In 2010, the Federal Reserve tried to extend the cap to include up-front fees, but its plan was thwarted, at least temporarily, by a lawsuit seeking a preliminary injunction to stop the rule from taking effect.

The Consumer Financial Protection Bureau (CFPB), formed last summer, took over the responsibilities formerly held by the Federal Reserve and other agencies for regulating consumer protections.  Yet the CFPB, an agency that is supposed to be working to protect consumers, is now proposing to undo the Federal Reserve’s regulation on up-front fees, which would allow banks to impose large sign-up fees (and high annual fees as well). 

Those of us working in Oak Park bankruptcy hope the government will do what is best for consumers.  Making the decision to file for bankruptcy is not easy, but there is no shame in asking for help and finding out about all of the legal options available to you.  If you are concerned about your credit card debt, or if you are worried you might lose your home to Chicago mortgage foreclosure, please consider speaking with a qualified professional today.

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Lawmakers Target Student Loan Debt as Next Debt Bubble

Lawmakers and those working in the financial industry have been predicting for some time that student educational debt will be the next big financial bubble to burst.  Illinois Senator Richard Durbin recently took aim at the private student-loan industry, advocating for new rules that would permit educational debts to be cleared away during bankruptcy, reports the Washington Post.  The ballooning cost of higher education and the long-term effects of student loan debt have caught the attention of lawmakers in Chicago and across the nation.  Some believe the current restrictions on discharging educational debt must change.

Last month, the Senate judiciary subcommittee held a hearing to discuss the problem.  As our Cook County bankruptcy lawyers know, the Federal Reserve Bank of New York issued a study finding that Americans owe about $870 billion in student loans.  That whopping figure surpasses the amount of outstanding credit-card debt or automobile loans.  Even worse, according to the report, more than a quarter of borrowers had past due balances.

Those of us working in Oak Park bankruptcy are concerned about high educational debt, too.  We realize that many Chicago area residents are bearing the heavy burden of paying back substantial student loans.  This, in turn, jeopardizes their overall financial security, and can impede their ability to buy a home, take out a car loan, or pay off medical debt.  Frequently, high debt, including educational debt, also goes hand-in-hand with the threat of Illinois mortgage foreclosure.

Currently, consumers cannot discharge student debts even if they file for bankruptcy.  Thus, those debts can cast a shadow over one’s financial security for decades.  Other debt, such as mortgages and credit card debt, typically can be discharged.  As Senator Durbin said during his opening comments at the judiciary subcommittee hearing, “It is clear that too many students have been steered into loans that they will not be able to repay and that they will never be able to escape.”

What is particularly concerning for us is that it is not only young people who are burdened with heavy debt.  The New York Federal Reserve study found that Americans 60 and over accounted for nearly 5% of past due student loan balances.  Rather than focusing on retirement and health care costs, notoriously high for older individuals, they are instead concerned about paying decades-old educational debt.  One consumer advocate who works for the National Consumer Law Center said she works with consumers in their 80s whose Social Security checks are being garnished to pay for old student loans.

The legislation sponsored by Senator Durbin would permit private student loan debt to be discharged in bankruptcy.  Consumers would still have to pay back their federal student loans.  This may not even go far enough, however, as it is likely that the bulk of student loan debt stems from federal loans.                        

So, the jury is still out on how to resolve the problem of student loan debt, an issue one consumer group has called the country’s next “debt bomb.”  It is important to note that while the law is still evolving in this area, Chicago bankruptcy law does permit many types of debt to be discharged.  Therefore, it is crucial to find out if you are eligible to file for bankruptcy if you are struggling.  There are many viable avenues to pursue to help you and your family regain financial security.  Please contact our firm today if you have questions about the process of filing for bankruptcy. 

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Illinois Debtors Should Ensure That Bankruptcy Petitions Are Prepared Legally

Our Oak Park bankruptcy lawyers know that filing for bankruptcy has become a reality for many Chicagoland residents who decide it is necessary as a last resort.  Bankruptcy is a legal procedure for dealing with consumer and/or business debt and is typically a one-time event for most people.  If you are not familiar with the process, it can sometimes seem overwhelming.  Many debtors worry that their situation is hopeless, but, thankfully, that is not true. 

If you are considering filing for bankruptcy, one of the most important things is to make sure you are completing all of your paperwork legally and above-board.  For example, as Delmarva Now News reports, someone who is not a lawyer (or who does not work for a lawyer) who prepares bankruptcy petitions for a fee and does not sign the petitions is violating federal law.  A bankruptcy petition is the official document that a debtor or creditor files to start a bankruptcy case.  It is legal for a non-lawyer to prepare bankruptcy petitions for a fee.  However, those preparers must sign the petition as well as other documents that must accompany the petition.  Bankruptcy petition preparers must also make significant written disclosures to the debtors they assist and provide those debtors with a written contract.  All of these requirements are essential to making sure your bankruptcy documents are prepared in accordance with Illinois bankruptcy law.

On the other hand, bankruptcy petition preparers who are not lawyers may not provide legal advice.  Changes to U.S. bankruptcy law frequently occur, so you should seriously consider consulting a legal professional to help you with your case.  A professional well versed in Illinois bankruptcy law can help assist you in answering many of the important questions you are sure to have if you are considering filing for bankruptcy.  For example, you might wonder what assets, if any, you can keep after filing for bankruptcy.  You may also be unsure whether you should even file for bankruptcy or may need to know what type of bankruptcy to file. 

While it can be tempting to cut corners, doing so could have serious, long-term consequences for you, your business, or your family.  If a problem arises with your bankruptcy petition, and you did not seek the help of a bankruptcy lawyer a debtor could be on his or her own.  This is because a bankruptcy petition preparer cannot represent a debtor, even at a creditors meeting.  If the petition is not prepared properly, it can result in the debtor’s case being dismissed or in a delay in the proceedings.  Debtors may also have to repay filing fees, which can add up if you are concerned about finances.

Our Oak Park bankruptcy attorneys work with clients to best meet their needs.  We realize that financial troubles can often seem overwhelming and that it can be difficult to admit you need help.  In these tough economic times, our lawyers will do everything they can to help you consider all of your options.  For a confidential bankruptcy consultation with the Emerson Law Firm, please call our office at 708-660-9190 or visit us online.

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Oak Park Bankruptcy Lawyers Share Data About Increased Pro Se Filings

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Oak Park Bankruptcy Lawyers Share Data About Increased Pro Se Filings

Our Chicago bankruptcy lawyers have learned that the Administrative Office of the U.S. Courts recently released a report outlining a troubling phenomenon in bankruptcy filings.  Over the past five years, according to the report, the growth of pro se bankruptcy filings has outpaced the rate of growth of overall bankruptcy filings.  This revelation is disturbing because it suggests that some of the nation’s most financially vulnerable citizens believe they must go it alone rather than hiring an attorney when facing bankruptcy. 

Pro se legal representation means that a person is representing himself or herself without legal counsel in a court proceeding.  A person may choose to represent himself or herself for many reasons, but, typically, it is because the person believes he or she does not need or cannot afford an attorney.  However, this often is not the case.  It is almost always worth considering hiring an attorney because it can mean a big difference in the outcome of your case.  

Over the past five years, non-pro se bankruptcy petitions increased 98%, but pro se bankruptcy petitions grew 187% over the same time period.  Pro se chapter 7 filings also rose 208%, and pro se chapter 13 filings increased 189%.  Chapter 7 bankruptcy is a process of debt liquidation under which debtors may consolidate student loans, protect loan co-signers, or eliminate credit card debt.  Chapter 13 bankruptcy is a process of debt restructuring that allows debtors to reorganize their debt under the supervision of a federal bankruptcy court.  Chapter 7 and chapter 13 filings make up the vast majority of overall bankruptcy filings.

The report found that the number of pro se petitions did not occur uniformly throughout the country.  For example, such filings increased most rapidly in the western part of the United States.  Illinois was not one of the top areas in which pro se bankruptcy filings increased.  Although the Northern District of Illinois had the second most filings in 2011 (with 63,440 filings), it ranked 39^th for pro se filings.

One legal scholar has suggested that the adoption of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 may have influenced the dramatic increase in pro se filings. The BAPCPA made several significant changes to the U.S. bankruptcy law.  For one thing, the BAPCPA made it more difficult for some consumers to file bankruptcy under chapter 7.  Thus, those consumers likely must file under chapter 13 instead.  This can have serious implications because under chapter 7 most debts are forgiven (or discharged), but under chapter 13, debts are discharged only after the debtor has repaid some portion of those debts.

The rapid increase of pro se bankruptcy filings suggests that debtors are struggling and that their legal rights may be negatively impacted.  For example, in a post on LexisNexis’ Bankruptcy Law Blog, this scholar noted that pro se filings are much less likely to succeed than filings by represented debtors. The post cited data presented at the National Conference of Bankruptcy Judges, which showed that nearly 90% of pro se chapter 13 debtors had their cases dismissed prior to confirmation of a plan and only 4% still had a case pending after four years.  A 2007 sample showed that 17.6% of pro se chapter 7 debtors had their cases dismissed for technical problems as compared to only 1.9% of represented debtors.

Such data is extremely concerning because meritorious claims may be dismissed due to technical issues.  Chicagoland bankruptcy attorneys know this is more likely to happen when debtors are not represented by legal counsel. 

The Oak Park bankruptcy lawyers at the Emerson Law Firm understand that financial troubles can often seem overwhelming and that it can be difficult to admit that you need help.  In these hard economic times, our attorneys will do everything they can to help you consider all of your options.

You can read the Administrative Office of the U.S. Courts’ full report here.  For a confidential bankruptcy consultation, please visit the Emerson Law Firm online or call 708-660-9190.

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Chicago Bankruptcy Lawyer Shares New Report Revealing Many Debtors Fail to Seek Professional Assistance

There is no easy way to admit that you are struggling to keep up with your monthly financial obligations.  Our Oak Park bankruptcy attorney has worked in the area long enough to understand the social, mental, and emotional challenges that come when one hits a rough financial patch.  Besides having the worry of not being sure how you will pay for basic needs, many local community members have the added stress of feeling ashamed about their financial position.  Yet, the fact remains that help is available for all residents to get out of these sticky financial situations. One need only know where to look.

Unfortunately, a new study reported in Loans Safe explained that a large percentage of those who could most benefit from have guidance with debt and credit issues fail to seek out the available help.  The latest research indicates that the number of people who visited a professional to receive debt assistance decreased 20% last year.  Instead, many families have taken a “head in the sand” approach which often leads to even more credit card debt, late payments, and the stress that comes worrying about how the situation will ever be resolved.  Ask any Chicago bankruptcy lawyer and they will explain how many of their clients admit to waiting longer than they probably should have before seeking out their services to learning what options are available.

Those looking into the matter explain that various factors may be at play in discouraging those who could benefit from visiting a professional from doing so.  For one thing, the emotional stress that comes with admitting that help is needed prevents many consumers from taking steps when they should.  In addition, one researcher said, “I think some are just tired of trying and have given up.”  With unemployment figures remaining high, poverty increasing, and ideas for improvement few and far between, it is easy to see how some facing complex financial challenges feel like giving up.  But it is important to remember on the flip side of the coin that the moments when things feel the most hopeless are the same moments when there is nothing to lose from trying something new.

The first step in getting things back on track is understanding what financial challenges you face and learning how the law applies in your case.  Visiting a Chicago bankruptcy lawyer to learn about your options does not obligate you to any course of action.  However, no matter what, much peace of mind comes with discovering whether bankruptcy is a logical step in your situation.  Contrary to the misperception of some, filing for bankruptcy is not a step that will permanently ruin your credit.  In fact, it is intended specifically help repair credit and allow those who need it a fresh start to get their financial affairs back in order.   In our area, Illinois bankruptcy law eliminates certain debts while allowing the resident to keep certain property such as pension and retirement plans, Social Security benefits, life insurance policies, and a variety of personal property.  Please consider giving our legal professionals at the Law Office at Sandra M. Emerson a call or visit us online today to schedule a bankruptcy consultation.     

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Once Affluent Chicagoland Families Struggle to Pay Bills in Tough Economic Times

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Once Affluent Chicagoland Families Struggle to Pay Bills in Tough Economic Times

Economic challenges have affected virtually all parts of the country for so long now that it is essentially “old news” to talk about the struggle that so many families in our area are facing.  However, for the actual residents worrying every single day about how they will make it to the next morning, the news is not old at all.  It is fresh and very real.  Our Oak Park bankruptcy lawyers continue to work with many of these community members who have done nothing wrong but have still found themselves in the wrong place at the wrong time.  When jobs are lost, business revenues decreases, and opportunities evaporate, so many local residents have difficulty keeping up financially as they did before the trouble hit.

A recent Chicago Tribune article explored the struggles that so many area residents continue to face.  The problem is not affecting any single spectrum of society.  Even those who were once well-off are now scrambling to make ends meet.  For example, the story highlights one family that has been hit hard by the economic turmoil.  The breadwinner of the family was earned a six figure salary as a bank manager in 2008.  However, the job and that salary were gone when the financial crisis hit, and the man has struggled to find steady work since then.  As a result his family faced a Chicago home foreclosure, has been evicted from two rental properties, and now lives in a modest ranch home with rent paid for by a relative.  The man admits that his family now relies heavily on government and charity for food, health care, and day-to-day necessities. 

Low-income families have been hit hard as of late, but more affluent Chicagoland families have also suffered.  Many once-wealthy families have had their lives turned upside down by lost jobs, pay cuts, disappearing savings, and home value decreases.  The emotional toll can be tough for those involved.  It is natural for pride to get in the way when families begin to rely on outside help—such as food pantries—to get by each day.  These pressures create everyday stress each, and family dynamics are often affected.  Many marriages have been frayed in these tough times, and children are made to handle situations with which they had never before been presented.

No matter how hard things get, local advocates remind all community members that help is available for those who need it.  For example, one local woman recalls visiting the Illinois Department of Human Services office for the first time to apply for Medicaid and food assistance.  She explained how she covered up her emotions while inside the facility but broke down into tears afterward in the parking lot.  Many local families have had to face similar tough realities in the last few years.

The Oak Park bankruptcy lawyers at our Emerson Law Firm have experience helping residents who are facing a wide variety of financial problems.  Whether bill collectors are become too aggressive, the bank is threatening to take the house, or some other financial challenges are at hand, it is important to remember that legal tools may be available to help.  Many residents in this situation often assume that disaster is inevitable, and so they wait out the clock without seeking any professional guidance.  This is a mistake.  We continue to urge all residents to contact our office and see how we can help.  There is nothing to lose from learning more, but much that can be gained.

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Bankruptcy Filing Numbers Drop, But Financial Struggles Continue

In tough economic times it is not uncommon for more and more individuals and families to find difficulty meeting expenses.  Whether it is the loss of a job or growing payments on credit card or mortgage debt, the real possibility of not being able to meet financial obligations is disheartening.  Most people have not contemplated what their course of action would be if they could no longer make the minimum payments on their debts.  Unfortunately, as that very situation becomes more common some believe that filing for bankruptcy comes with an unjustifiable stigma by those it could help most.   

A recent story in the Chicago Tribune reported that U.S. consumer bankruptcy filings fell 18 percent between July 2010 and July 2011. While these figures from the National Bankruptcy Research Center may sound like the positive signs of a rebounding economy, our Oak Park bankruptcy lawyers know that there remains a strong demand for legal help in these matters.  Somewhat discouragingly the Labor Department recently announced that unemployment rates remain near 9.2%.  When the unemployment figure takes into account individuals who are merely working part-time jobs for economic reasons, it rises to 16.2 percent, making it likely that Illinois bankruptcy filings will not be sharply declining anytime soon.

In what is perhaps a reflection of a nation tightening its belt, the Commerce Department cited a 0.2 percent decline in consumer spending in June.  Even if that trend were to continue it does not mean bankruptcy numbers will immediately relent.  American Bankruptcy Institute Executive Director Samuel Gerdano has stated that “there is typically a 12-18 month lag between declines in consumer spending and bankruptcy levels.”

With nearly a sixth of the country unemployed or underemployed and no let up in bankruptcy rates expected in the near future it is likely that more individuals will be considering this process as a way to obtain relief from overwhelming debts.  To the uninitiated bankruptcy may seem like a willful destruction of your finances, requiring the filer to liquidate all of their assets and possessions.  That is simply not the case.

While Illinois bankruptcy filings cannot eliminate debt from things like child support, alimony, certain types of student loans or recent back taxes, it does eliminate most other kinds of debt and can allow the filer a much desired opportunity to get their finances back on track.  Additionally, bankruptcy does not require the person filing to impoverish themselves and forfeit benefits they may have spent decades earning.  Payments from pensions, social security, retirement plans and workers’ compensation are often protected as may be exemptions towards a residence, cars and personal property.

Our Oak Park bankruptcy lawyers know that in some circumstances filing bankruptcy can help to clear up one’s finances before a situation is exacerbated further.  Even the most indebted person can regain a modicum of control over their financial future through the benefits of filing bankruptcy. Anyone facing serious financial hardship would be well advised to consult a bankruptcy professional to learn if filing might be in their best interest.

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