Wednesday, December 13, 2017

Race and Responsibility Stereotypes in Consumer Bankruptcies

Are harmful stereotypes about race and responsibility impacting certain consumers who file for bankruptcy? In other words, can racial stereotypes affect the bankruptcy process and American bankruptcy statistics more generally?
Interdisciplinary Research into Race, Racism, and American Bankruptcy
A recent interdisciplinary study from the University of Illinois acknowledges how “prior research has established that society appears to accord less forgiveness to African-Americans when they arrive in bankruptcy court,” which means that “proceedings take longer, cost more, and typically lead to lower levels of debt relief.” According to the new research, “practitioners inside the bankruptcy system have little knowledge of the racial disparities that exist, relying instead on common stereotypes about race, responsibility, and debt.” In other words, without acknowledging structural racial and socioeconomic disparities, assumptions get made about non-white consumers who file for bankruptcy in the country.
The recent study was conducted by researchers in psychology and in legal studies to present an interdisciplinary approach to the problem. According to Robert M. Lawless, a co-author of the study who is Max L. Rowe Professor of Law at the University of Illinois, this ways in which racial stereotypes not only persist in consumer bankruptcy matters but actually could affect how bankruptcy procedures work “should be a major policy concern.”
He highlights how African Americans are overrepresented in Chapter 13 bankruptcy filings. Moreover, according to Lawless, the lack of attention to such statistics is only worsened when there is no attention to the ways that these disparities have arisen. Lawless is co-director of the University of Illinois College of Law’s Program on Law, Behavior, and Social Science.
Perceptions of Lawyers Highlighted in Recent Study
The researchers involved in the new study previously conducted research into stereotypes and the consumer bankruptcy system back in 2012. As they worked on this new research, their focus shifted more closely to lawyers’ perceptions in the bankruptcy system with regard to race and racial stereotypes.
What did they conclude? There are many consumer advocates who do not always take into account the power of racial stereotypes—how they affect lawyers assisting clients, as well as how they affect bankruptcy judges making decisions about discharges. In Lawless’s research, he found evidence to suggest that “about 60 percent of consumer bankruptcy attorneys believed that whites were twice as likely to file Chapter 13 bankruptcy, when in reality it is actually blacks who are twice as likely to do so.”
To be clear, Lawless and Faith Shin, a researcher in the University of Illinois psychology department, concluded that “their perceptions of racial disparity and the actual racial disparities were completely inverted.” Shin went onto explain how “the pattern that emerges is one that hews to the well-worn American stereotypes about which race will own up to their debts and which won’t.”
Most importantly, perhaps, the researchers emphasize that their study underscores persisting problems of believing racial stereotypes—both in consumer bankruptcy law and in other areas.
Contact an Oak Park Bankruptcy Attorney
If you have questions about filing for Chapter 13 bankruptcy, you should discuss your questions with an Oak Park bankruptcy lawyer. An advocate at the Emerson Law Firm can speak with you today. Contact us for more information.
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Tuesday, December 5, 2017

FHA Loans and Consumer Bankruptcy

If you are thinking about filing for consumer bankruptcy in Chicago, or if you filed for Chapter 7 or Chapter 13 bankruptcy relatively recently, you may be wondering about your options for a mortgage. For instance, will you be able to qualify for a mortgage again after filing for bankruptcy? Can homeownership be in your future? The answer to both of those questions is yes, but it can be more difficult to get some types of loans after you have filed for bankruptcy. According to a recent article from U.S. News & World Report, loans from the Federal Housing Administration (FHA) may be the best bet for consumers who have recently filed for bankruptcy or are planning to file for bankruptcy in the near future.
How FHA Loans are Beneficial for Consumers After Bankruptcy
There are many benefits to FHA loans, especially for consumers who are just starting to get back on track with their finances. For conventional mortgages (that are not FHA loans), borrowers typically need to have a down payment of about 20%. With an FHA loan, however, potential borrowers can have as little as a 3.5% down payment. To put that in perspective, imagine that you want to buy a house for $300,000 in the Chicago area. For a conventional loan, you would typically need to have $60,000 as a down payment. To obtain an FHA loan, however, you may only need as little as $10,500 as a down payment.
For consumers in Oak Park who have filed for bankruptcy in the last couple of years who want to buy a home, FHA loans often allow them to do so relatively quickly after the bankruptcy. While Chapter 7 bankruptcy does give debtors a fresh start, it can be extremely difficult to save tens of thousands of dollars in a short period of time, even if you are managing your money well. As such, knowing that you may be eligible for an FHA loan that only requires a 3.5% down payment can be encouraging.
In addition, FHA loans do not require the same strong credit scores that many conventional home loans require. Indeed, as the article underscores, FHA loans with a 3.5% down payment require only a credit score of 580 or above, while even consumers with a credit score of 500 can be eligible for an FHA loan if they have a down payment of at least 10%.
Waiting Times for Mortgages After Filing for Consumer Bankruptcy
If you file for bankruptcy and want to apply for an FHA loan shortly thereafter, how long do you have to wait? The article explains that waiting times for individuals who have filed for Chapter 7 or Chapter 13 bankruptcy can vary depending upon the circumstances of the cases. Generally speaking, these are the waiting time:
  • Chapter 7 bankruptcy: Two years for bankruptcy with extenuating circumstances (meaning “nonrecurring events beyond your control that result in sudden, significant, prolonged reduction in income or a catastrophic increase in financial obligations), or 4 years otherwise;
  • Chapter 13 bankruptcy: Two years from the date of discharge, or four years from the date of dismissal; and
  • Multiple bankruptcies: Three years from the date of the most recent discharge or dismissal if there are extenuating circumstances, or five years if you have had more than one bankruptcy filing in the last seven years (and that most recent bankruptcy must have resulted from extenuating circumstances).
Contact an Oak Park Bankruptcy Lawyer
If you have questions about obtaining a home loan after bankruptcy, an Oak Park bankruptcy attorney can speak with you today. Contact the Emerson Law Firm for additional information.
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Thursday, November 30, 2017

Bankruptcy Rule Changes Taking Effect This December

For many consumers who are struggling with debt, filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy can be a powerful tool to manage debt and to get a fresh start. For anyone who is considering bankruptcy, it is important to be aware of some changes to current bankruptcy law. Recent amendments to the Federal Rules of Bankruptcy Procedure will take effect on December 1, 2017. What do you need to know about these amendments and how they will impact personal bankruptcy cases?
Changes in the Rules for Proofs of Claim
When a debtor files for bankruptcy, any creditors who want to make a claims against the assets of the debtor’s estate need to file a proof of claim. In the proof of claim, the creditor needs to state the amount of money owed. Rule 3002 of the Bankruptcy Code was amended recently to change the date upon which creditors must file proofs of claim. Once the changes to the law take effect on December 1, creditors will need to file proofs of claim in most Chapter 7 bankruptcy and Chapter 13 bankruptcy cases no later than 70 days after the debtor files the bankruptcy petition or the date upon which the debtor converts her Chapter 7 case to a Chapter 13 case.
The bar date for proofs of claim limits the window a creditor has to file a proof of claim. Prior to the amendments, creditors typically 90 days instead of 70 days. In addition to the change in the date by which proofs of claim must be filed, amendments to Rule 3002 now require both secured and unsecured debtors in Chapter 13 cases to files proofs of claim in order to maintain a claim.
Given that changes to the rule mean that creditors generally have less time to file proofs of claim, the amendments do permit extensions for filing proofs of claim when the creditor did not have sufficient notice of the bankruptcy filing. However, bankruptcy courts typically cannot extend the deadline 60 days from the original deadline, and in doing so the bankruptcy court first will need to determine whether that debtor failed to notify the creditor in a timely manner, or that notice was mailed to the creditor outside the country, which contributed to the delay.
Bankruptcy Court can Determine Secured Claim Amount
Amendments to Rule 3012 and the Valuation of Security will change how the amount of a secured claim in Chapter 12 or Chapter 13 bankruptcy proceedings is determined. Specifically, under the revised law, debtors can request that the bankruptcy court make a determination about the amount of the secured claim. The determination of the secured claim amount made by the bankruptcy court will be binding on both the creditor and debtor, even if the creditor files a proof of claim for an alternate amount or if the debtor files a schedule that contains a different amount.
Seek Advice from an Oak Park Bankruptcy Lawyer
Do you have questions about how amendments to the Bankruptcy Rules could impact your case? You should discuss your situation with an Oak Park bankruptcy attorney today. Contact the Emerson Law Firm to learn more about how we assist debtors throughout the Chicago area.
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Tuesday, November 28, 2017

Court Addresses Unfair Debt Collection Practices

For low-income people in the Chicago area who are dealing with large amounts of consumer debt, being harassed or treated unfairly by debt collectors can be particularly devastating. A recent case out of the U.S. Court of Appeals for the Second Circuit found in favor of debtors in the case, according to a report in the New York Law Journal. While the decision is only binding upon other courts within the Second Circuit, commentators expect that it could be persuasive and could end up playing a role in setting a similar precedent in courts across the country. As such, Oak Park residents should know about the case and how its outcome is a win for consumers who have been victims of illegal debt collection practices under the Fair Debt Collection Practices Act (FDCPA).
The FDCPA and the Case of Arias v. Gutman, Mintz, Baker & Sonnenfeldt, PC
The recent case decided by the Second Circuit, Arias v. Gutman, Mintz, Baker & Sonnenfeldt, PC (2017), could be an important step in holding debt collectors accountable throughout the country for practices that violate the FDCPA. What do you need to know about the case?
According to the Consumer Financial Protection Bureau (CFPB), the case was initially filed in October 2016. It involved “claims under the Fair Debt Collection Practices Act against a debt-collection law firm that allegedly attempted to collect a judgment debt by restraining a consumer’s exempt Social Security benefits.” More precisely, the plaintiff (a consumer) alleged that the defendant debt collector violated section 1692e and 1692f of the FDCPA “by filing a false, deceptive, and misleading affirmation in . . . court and by maintaining a restraint on [the defendant’s] bank account in bad faith.
The case began when the debt collector attempted to garnish the debtor’s Social Security retirement income (SSRI), which was exempt from garnishment under state law. The Social Security Administration (SSA) clarifies that, while this particular case arose outside of the state of Illinois, Social Security benefits typically are exempt from attachment, garnishment, and other types of legal process.
Attempting to Collect Exempt Benefits Violates the FDCPA, Court Says
The court ruled that the debt collector’s actions violated the FDCPA. What do sections 1692e and 1692f of the FDCPA—the specific sections in question—say about prohibited debt collection practices?
The court first clarified the goals of the FDCPA, including to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” More specifically, it explained that section 1692 “prohibits false, deceptive, or misleading representations,” while section 1692f “prohibits collecting or attempting to collect a debt through unfair or unconscionable means.”
If you have been treated unfairly by a debt collector who has attempted to garnish exempt benefits, you should discuss your case with an Oak Park consumer protection attorney as soon as possible. Contact the Emerson Law Firm to learn more about how we can assist you.
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Monday, November 20, 2017

Seniors Still Filing for Bankruptcy Due to Medical Debt

While some reports suggest that consumer bankruptcy rates are falling in Oak Park and throughout the U.S., there are certain populations that may be struggling with debt at higher rates than others. More precisely, according to a recent article in Forbes Magazine, older Americans continue to file for bankruptcy at particularly high rates due to insurmountable medical bills. Many seniors who have already filed for Chapter 7 bankruptcy have described it as a “godsend,” emphasizing that they would not have been able to survive if they had not made the decision to file for bankruptcy in order to deal with hospital bills and surgery costs that were out of reach.
Why do older Americans have higher medical debt than individuals in other age groups?
If you are or an elderly loved one with substantial medical debt are thinking about filing for personal bankruptcy, what else do you need to know?
Seniors Experience Serious Medical Conditions Requiring Costly Surgeries at Significantly Higher Rates Than Younger People
Americans of all ages are currently facing medical debt, and many of those Americans regardless of age may consider filing for consumer bankruptcy in order to get a fresh start. At the same time, seniors tend to have more medical debt than others. One of the major reasons that elderly debtors have higher rates of medical debt is that they often require costly emergency surgeries and other hospital treatments at rates significantly higher than for younger age groups. Indeed, as a report from AARP notes, hospital visits increase in frequency and severity as we age. The following are among the most common reasons that older adults end up in the hospital, facing staggering medical debt:
  • Cardiac arrhythmias, which are heartbeat irregularities that frequently lead to stroke and cardiac arrest (about 543,000 adults over the age of 65 are hospitalized for this reason each year);
  • Congestive heart failure, which leads to more than 750,000 hospitalizations of older adults each year and often requires surgical intervention;
  • Infections, from pneumonia to urinary tract infections, which frequently lead to lengthy (and thus costly) hospital stays;
  • Coronary atherosclerosis, or a “blockage of blood flow to the heart” which frequently requires surgery and a substantial hospital stay; and
  • Stroke, for which nearly 900,000 seniors are hospitalized each year.
As you can see, the most common reasons for older adults to be hospitalized are emergency situations that result in long and expensive hospital stays, and often require expensive surgeries. Given these facts, it is not entirely surprising that so many elderly Americans have overwhelming medical debt.
Bankruptcy can Help Seniors Who are Dealing with Medical Debt
As the Forbes article underscores, many seniors who are struggling with medical debt were people who always paid bills on time and worked diligently to avoid having consumer debt. However, medical debt remains the leading cause of bankruptcy throughout the country, and seniors account for about 8% of all filers. To put that number in perspective, the rate of seniors filing for personal bankruptcy due to medical debt has risen since 2008, while other consumer bankruptcy rates largely have declined.
While many seniors have said they felt guilty about the thought of filing for bankruptcy prior to doing so, a large majority of those seniors who end up filing experience one primary emotion - relief.
To learn more about the benefits of filing for bankruptcy is you are over the age of 65, you should speak with an Oak Park bankruptcy lawyer about your situation. Contact the Emerson Law Firm to learn more about how we can help you.
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Tuesday, November 14, 2017

Manage Your Debt Before the Holidays


As the holiday season approaches, it is important for consumers in Oak Park to think carefully about their finances and current consumer debt, and ways to avoid overspending on gifts, travel, and other costly ventures. As a recent report from Consumer Affairs explains, consumers often do not plan ahead for the economic costs of the holidays, and as a result, they end up taking on more credit card debt that they may not be able to pay off in the New Year.
How can you be financially prepared for the holidays? What steps can you take to avoid insurmountable debt that could lead to personal bankruptcy?
Holiday Debt can ‘Snowball’
As the report notes, “debt accumulated during the holidays can stick around, and continue to snowball, well into the New Year.” Indeed, a recent study determined that Americans add more than $1,000, on average to their credit card debt during the holiday season. While that might not sound like a lot of money in the short term, if you already owe thousands of dollars in credit card debt, you could end up paying significantly more in the long run.
The study reported that “about half of those surveyed planned to chip away at their debt over more than four months or just make the minimum payments—which could extend the debt to 10 years or more and tack on nearly $400 in interest.” In other words, even going into debt by an additional $1,000 during the holidays can have long-term effects. What can you do to prevent holiday debt from snowballing?
Develop Strategies for Spending this Holiday Season
One of the keys to avoiding significant holiday debt is planning ahead for your spending limits. The following are some tips for Oak Park consumers to consider as Thanksgiving and the rest of the holiday season looms:
  • Determine how much you can spend ahead of time. This means looking at your monthly expenses, considering the amount leftover that you have to spend during the month, and then consider ways to economize. Write down the amount of money you have to spend during the holidays, and do your best to avoid going over that budget.
  • Make a list of people for whom you need to buy gifts. One of the first ways to avoid going beyond your holiday budget is to make a list of everyone that you plan to buy a gift for, and to determine the budget for gifts based on the amount of money you set aside.
  • Try to set aside money each week. If you typically buy three to four coffees at the local coffee shop each week, consider cutting back on coffee and saving that money for the holidays. It can add up.
  • Pay for gifts and other holiday items with cash (or your debit card) instead of using your credit card. By paying with the funds that you actually have now, you can avoid going into debt to buy gifts for others.
Seek Advice on Your Debt from a Consumer Protection Lawyer
Many Chicago residents are struggling with consumer debt. In some cases, filing for Chapter 7 or Chapter 13 bankruptcy may be able to help. An Oak Park consumer protection lawyer can discuss your options with you. Contact the Emerson Law Firm today to seek advice from an experienced advocate.
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