Thursday, November 7, 2013

Lake County Foreclosure Mediation Program to Start!

Lake County, IL has announced its Foreclosure Mediation Program! Similar to mediation programs in Cook County and Will County, the program will provide eligible Lake County homeowners an opportunity to address their mortgage lender and agree upon an alternative to foreclosure outside of the courtroom. (Read more about mediation and other options to save your home here.)

Who is eligible for Lake County Foreclosure Mediation?
Residential foreclosure cases filed after December 2, 2013 will be automatically eligible. Homeowners with older cases may petition the court to participate in the program.

Will mediation stop a foreclosure?
Participation in the mediation program will put a temporary hold on the foreclosure proceedings to allow the mediation to be completed. The homeowner must meet all deadlines in order maintain eligibility and continue in the mediation process.

The Mediation Process
  1. The homeowner must attend an Informational Session within 35 days of receiving the foreclosure summons. Homeowners must register for the Informational Session by calling the Affordable Housing Corporation of Lake County "AHCLC" at 847.263.7478 or visiting their website for upcoming sessions.
  2. Within 7 days of attending the Informational Session - the homeowner must schedule an appointment with a counselor from AHCLC. Counseling information & forms to complete are available on their website.
  3. Counseling appointments should be scheduled and completed within the next 30 days.The homeowner must attend their scheduled Counseling appointment and provide all required documentation.
  4. Once Counseling is complete, the homeowner will have 60 days to reach a resolution with the plaintiff at a mediation session(s).
If the homeowner misses any of these deadlines he/she will no longer be eligible for mediation (unless the court makes a special exception) and the foreclosure proceedings will resume. 


Read the official rules here or call our office for more information about how to save your home.

Monday, July 22, 2013

Bankruptcy and Eviction

Bankruptcy, especially Chapter 7, has only one significant option when it comes to leases; the debtor in the bankruptcy filing can "reject" the lease, essentially breaking the contract and discharging the debt.

A recent issues that came up with one of my clients involved an eviction proceeding, and whether a bankruptcy proceeding can stop the eviction.  The answer is, of course, "maybe," and it depends on when the bankrutpcy case is filed.

The key event in an eviction proceeding is the "order of possession."   The order of possession is what allows the landlord to take possession of the property, and directs the county sheriff to remove the tenant and the tenant's belongings from the property. 

What is stopped or "stayed" by the bankruptcy case is determined by 11 U.S.C. 362, which is known as the Automatic Stay

11 U.S.C 362(a) provides as follows:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
[...]

So, at first blush, it appears that the eviction proceeding would be stayed, since an eviction proceeding is a judicial proceeding to enforce a claim against the debtor, namely, a lease.

However, 11 U.S.C. 362(b) provides some exceptions to 362(a), namely section 22:
The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay— [...]

(22) subject to subsection (l), under subsection (a)(3), of the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor;

Landlords get a specific exception to enforce orders of possession; they do not have to seek relief from teh bankruptcy court.

So, that leaves us with two possible scenarios, depending on whether the bankruptcy case is filed before or after the order of possession in the eviction case.

Bankruptcy filed before eviction proceeding / order of possession.

If the bankruptcy is filed before the order of possession, then the eviction proceeding will be stayed until either (1) the bankruptcy case ends, or (2) the landlord seeks relief from the bankruptcy court by filing a motion for relief from the stay.


Bankruptcy filed after eviction proceeding / order of possession.


If the bankruptcy case is filed after the order of possession, then under 11 U.S.C 362(b)(22), the automatic stay does not apply and the landlord is free to continue the eviction proceeding.

Monday, July 1, 2013

Exemptions - What can you keep in bankruptcy?

One of the most important parts of bankruptcy are the exemptions, which make up Schedule C of the bankruptcy petition.  Exemptions in Illinois are determined by state law.  In other states, they may be determined by state or federal law, or a debtor may have a choice on which exemptions apply.

What is an exemption?

Exemptions are rights you can claim to protect things from being seized to pay your debts.  Exemptions are like highlighters - anything you can highlight with the exemption, you can keep in bankruptcy and protect from your creditors.

In Illinois, the majority of exemptions are listed in 735 ILCS 5/12-1001.  There are a few other exemptions in other code sections, such as the Homestead Exemption (735 ILCS 5/12-901) as well.

  • Homestead Exemption - an individual can protect up to $15,000 in home equity.  Married couples can protect up to $30,000 in home equity.
  • The "wildcard" exemption - this exemption applies to any personal property, and is $4,000 for one person, and $8,000 for a married couple.  This exemption can be split among any number of items of personal property.
  • Auto exemption - this exemption applies only to a motor vehicle, and each person gets one, worth $2,400.  This exemption is a bit different, because it can't be divided between multiple vehicles.  
These three exemptions are the most important and the most used.

How does claiming an exemption work?

Exemptions are rights, and must be claimed or asserted.  In a bankruptcy petition, they are listed in Schedule C.  

An example makes exemptions easier to understand.  We start with the value of the item - let's say a house, worth $150,000.  The house is subject to a mortgage, with a balance of $140,000.  The value of the house, minus the balance owed on the mortgage, is $10,000.  That amount is the net equity in the property.  The debtor asserts his or her homestead exemption of $15,000 against it, and the property is completely exempt - in fact, it is over-exempt, by $5,000.

Below is a table, typical of most debtors.  The debtor owns the house, has a car, has $2,000 in the bank, and has a gold watch worth $500.  The debtor can keep all these things in a Chapter 7 bankruptcy.


ItemValueLienExemptionNet Value
Home$150,000 $140,000 $15,000 $(5,000)
Car$10,000 $8,000 $2,400 $(400)
TV & Furniture$1,500 $- $1,500 $-
Bank Account$2,000 $- $2,000 $-
Clothing$500 $- $500 $-
Gold Watch$500 $- $500 $-



By using the exemption "highlighters," the debtor here can keep his personal belongings.  Because of these exemptions, the vast majority of Chapter 7 bankruptcy cases are considered "no asset" cases, since there is nothing of value that is not exempt.  Most debtors in bankruptcy can keep all their personal belongings.

Wednesday, April 24, 2013

Discharge Eligibility - When Can I file a new bankruptcy case?

Bankruptcy is a tool and product of federal law, and the truth of the matter is that, due to a huge variety of circumstances, it may be necessary to file more than one bankruptcy case.  The question then becomes "when can I file a new bankruptcy case?"

First of all, it is important to realize that being eligible to file for a particular form of bankruptcy relief is not the same as being eligible for bankruptcy discharge.  Eligibility for filing bankruptcy simply allows debtors to go through the process.  Discharge eligibility determines whether a discharge order will be entered at the end of the case; the discharge order is what actually eliminates the debts.

In some cases, using a Chapter 13 bankruptcy, even if a debtor is not eligible for discharge, can be a very effective way to manage debt.  The lack of discharge at the end can make the decision difficult, but it can still be the right decision for a given circumstance.

Eligibility for discharge is determined by the filing date of the previous case.

New Case
Old Case
Waiting Period
Statute
Chapter 7
Chapter 7
8 years
Chapter 7
Chapter 13
6 years, or
 none if the last case paid 70% or more on claims
Chapter 13
Chapter 7
4 years
Chapter 13
Chapter 13
2 years


  • If your previous case was a Chapter 7 case, and you want to file a new Chapter 7 case, you have to wait 8 years from the filing of the previous Chapter 7 case to be eligible for discharge in the new Chapter 7 case.
  • If your previous case was a Chapter 13 case, and you want to file a new Chapter 7 case, then you have to wait 6 years from the filing date of the previous Chapter 7 case to file new the Chapter 13 case.  However, if the payments made in the previous Chapter 13 case paid more than 70% of the claims, then you can file a Chapter 7 immediately after the Chapter 13 is completed.
  • If your previous case was a Chapter 13 case, and you want to file a Chapter 7 case, you must wait 4 years from the filing date of the Chapter 13 case to file the new Chapter 7 case.
  • If your previous case was a Chapter 13 case, and you want to file a new Chapter 13 case, you must wait 2 years from the filing date of the previous Chapter 13 case to file the new Chapter 13 case.

(f) Notwithstanding subsections (a) and (b), the court shall not grant a discharge of all debts provided for in the plan or disallowed under section 502, if the debtor has received a discharge—
(1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for relief under this chapter, or
(2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order.


(8) the debtor has been granted a discharge under this section, under section 1141 of this title, or under section 14, 371, or 476 of the Bankruptcy Act, in a case commenced within 8 years before the date of the filing of the petition;
(9) the debtor has been granted a discharge under section 1228 or 1328 of this title, or under section 660 or 661 of the Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least—
(A) 100 percent of the allowed unsecured claims in such case; or
(B)
(i) 70 percent of such claims; and
(ii) the plan was proposed by the debtor in good faith, and was the debtor’s best effort;


Friday, April 19, 2013

Chapter 7 Bankruptcy Basics

Chapter 7 bankruptcy is, at its heart, a fresh start.

It is a legal proceeding in which an individual or married couple, called Debtors, seek relief from the bankruptcy court.  In essence, the Debtors say to the court, "we don't have any money to pay our debts, and we don't have anything we can sell to pay our debts."  In those circumstances, the bankruptcy court will then discharge those debts, which means that the Debtors do not owe them any more and the creditors cannot engage in any collection action against the Debtors anymore.

Chapter 7 bankruptcy is also called "straight bankruptcy" or "liquidation."  There are procedures in the bankruptcy code that allow the bankruptcy trustee to sell a Debtor's assets to pay creditors.  However, Debtors are protected under Illinois law by exemptions, which protect certain assets from being taken to pay debts.  In the vast majority of cases, the Debtors do not have anything that can be taken to pay creditors, and the trustee makes a report of "no assets" or "no distribution" to the bankruptcy court.

Thursday, April 18, 2013

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