Friday, July 13, 2018

Bankruptcy and the Death of a Spouse

Nobody in Oak Park wants to think about the prospect of a spouse’s death and how it will affect their lives emotionally, psychologically, and also financially. However, some couples need to consider such issues due to health concerns, or because they are thinking about filing for bankruptcy. We want to address some of the ways in which a spouse’s death can affect personal bankruptcy proceedings. For example, if a couple has thousands of dollars of debt that has been accrued by only one spouse, does that debt go away upon the spouse’s death? If a couple files for Chapter 13 bankruptcy together and one of the spouses passes away, how does the court handle that Chapter 13 repayment plan?
We will discuss a couple of different situations that can arise when married couples accumulate debt and file for bankruptcy.
Marital Debt and the Consumer Bankruptcy Option
A recent article in the Los Angeles Times posed this question: What happens when one spouse has a terminal illness, and the couple has tens of thousands of dollars in credit card debt? In such a scenario, does it make more sense for the couple to file for bankruptcy together, or, since the ill spouse accumulated most of the credit card debt, will the debt go away after that spouse’s death?
Generally speaking, debts that are incurred during a marriage are debts of the marriage (or marital property). As such, just because one spouse amassed the debt, it will likely be treated as debt that belongs to the marriage. In particular, many couples have credit card accounts on which they are both listed, making clear that both spouses are responsible for the debt. As such, failing to pay on the type of credit card debt mentioned above would likely put the surviving spouse in a financially precarious situation. If both spouses are elderly, it is possible that the only other assets are exempt—such as Social Security benefits and IRA benefits. However, many older couples own homes and other significant assets that could be at risk if the credit card company were to file a claim.
In other words, it is almost never a good idea for one spouse to assume that he or she is not responsible for the other spouse’s debts. Bankruptcy could be an option, but the couple should speak with a bankruptcy lawyer about options.
Chapter 13 Bankruptcy for Married Couples and the Death of a Spouse
In a different scenario, what happens when a married couple files for Chapter 13 bankruptcy together and one of the spouses dies unexpectedly? There are a number of different issues to consider here.
First, the death of a spouse may mean that the surviving spouse cannot complete the Chapter 13 plan on his or her own. At the same time, it is important for couples filing for bankruptcy together to know that the death of a spouse does not mean that the case will simply be dismissed. Sometimes the court will determine that the surviving spouse can continue to make payments on the original Chapter 13 plan as it stands. In other situations, the surviving spouse may be able to modify the Chapter 13 plan. In yet other cases still, the surviving spouse may be able to request a hardship discharge.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about your bankruptcy case? An experienced Oak Park bankruptcy attorney can assist you. Contact the Emerson Law Firm for more information.
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Saturday, July 7, 2018

Local Governments and Debt Collection Practices

Can local governments play a role in stopping harmful debt collection practices to help lower income families? According to a recent article in American Banker, correcting some of the present problems with the debt-collection system in the U.S. may involve local governments. More specifically, according to the article, “consumer advocates are urging local governments and courts to improve their debt-collection systems to take into account the ability of low-income households to pay fines or court costs related to traffic violations or other infractions.”
While certain fines are unlikely on their own to lead a family to seek protection by filing for consumer bankruptcy, even small debts can add up quickly. If local governments could find a way to account for the financial difficulties faced by lower income families when assessing certain fines and fees, more families may be able to deal with their debts. In the event that debt does become too difficult to manage, an Oak Park bankruptcy attorney can help with options.
Civil Fines and Fees Affect Non-White and Low-Income Families Disproportionately
Are government debt-collection practices harming non-white and low-income individuals in the Chicago area? The article cites a recent report that argues current government debt-collection practices are indeed harmful, and that they “are contributing to downward spirals for low-income communities and communities of color.” Many individuals who are within these communities are “more likely than others to accumulate unpaid debts, such as vehicle-related tickets and video tolls.”
That research was conducted in four different states: Illinois, California, Maryland, and North Carolina. In Chicagoland specifically, researchers determined that many residents of the city have become trapped in a “cycle of debt” due to current collection practices. The report was authored in part by the Woodstock Institute in Chicago, which is a nonprofit organization working to advance economic security and community prosperity in the city. Not only do individuals from communities of color and low-income areas get more traffic tickets and citations that people who come from different communities, but those fines and fees are more likely to lead to unmanageable debt.
How Local Government in Illinois can Help to Prevent a Cycle of Debt
What can local governments do to help prevent this cycle of debt and, perhaps, to help families manage their debts in a productive way? Rather than piling on ticket after ticket, the article suggests that, for example, the city government in Chicago could “develop ability-to-pay programs that evaluate an individual’s financial situation to determine the proper amount of fine or fee.” In other words, not everyone would pay the same amount for a civil fine or fee, but instead would be responsible for an amount tied directly to that person’s income and assets.
While local governments may not have all the answers, they can at least take steps to avoid making financial circumstances worse for lower income families in Chicagoland.
Learn More from an Oak Park Bankruptcy Attorney
Even though bankruptcy might seem daunting, it could be the best choice for you if you are struggling to repay significant amounts of debt. An experienced bankruptcy attorney in Oak Park can discuss your options with you today. Contact the Emerson Law Firm to learn more about how we help individuals and families in the Chicago area.
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Friday, June 29, 2018

Punitive Damages and the Bankruptcy Code’s Automatic Stay

For any Oak Park debtors who have recently filed for personal bankruptcy or are considering consumer bankruptcy, it is important to know about punitive damages and the U.S. Bankruptcy Code’s automatic stay. In short, the U.S. Bankruptcy Code says that, in some cases, debtors can receive punitive damages when a creditor intentionally violates the automatic stay. To understand why this is significant, we will tell you more about punitive damages and the automatic stay, and then we will discuss situations in which punitive damages may be awarded for a violation of the automatic stay.
What are Punitive Damages?
Generally speaking, courts recognize two different types of damages awards - compensatory damages and punitive damages. Compensatory damages are those that are supposed to compensate a person for his or her losses, and they are typically characterized as general and special damages. The other type of damages award is known as a punitive damages award. Debtors may be eligible to obtain both compensatory and punitive damages when a debtor violates the automatic stay, but we want to focus on punitive damages.
Punitive damages are different from compensatory damages in that they do not compensate a person for specific losses. Instead, punitive damage are designed to punish another party’s particularly bad or egregious behavior and, most often, to discourage such behavior in the future. In some situations in which a creditor violates the automatic stay, a court may award punitive damages.
Understanding the Automatic Stay and the Award of Punitive Damages
As we mentioned above, the U.S. Bankruptcy Code contains what is known as an automatic stay. This provision is extremely important to debtors because it is what tells creditors that they must stop collecting on debts once a debtor files for bankruptcy protection. It is among the most important parts of the Bankruptcy Code in protecting debtors. In most situations, creditors will adhere to the automatic stay and will not attempt to collect on debts once a person has filed a bankruptcy petition. In some situations, however, debtors do violate the automatic stay and continue to try to collect from a debtor.
In these instances, the Bankruptcy Code states that “an individual injured by any willful violation of a stay provided by this section . . . in appropriate circumstances, may recover punitive damages.” The Bankruptcy Code clarifies that in situations in which a creditor’s violation of the automatic stay is “based on an action taken . . . in good faith,” then damages are limited to actual damages (or compensatory damages). In other words, punitive damages are only awarded in situations in which there is a willful violation.
What constitutes a willful violation? Numerous bankruptcy courts have interpreted this language. For instance, in Crysen/Montenay Energy Co. v. Esselen Associates, the court clarified that when a creditor acts maliciously or in bad faith, then punitive damages are appropriate. How much money is appropriate for punitive damages? The answer to this question is specific to each case. According to the court in In re Curtis, “what would be sufficient to deter one creditor may not even be sufficient to gain notice from another.” As such, “punitive damages must be tailored not only based upon the egregiousness of the violation, but also based upon the particular creditor in violation.”
Contact an Oak Park Bankruptcy Attorney
Is a creditor continuing to contact you even though you filed for bankruptcy? An Oak Park bankruptcy attorney can help you. Contact the Emerson Law Firm today.
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Thursday, June 28, 2018

Retiring With Consumer Debt

Facing a significant amount of consumer debt can be difficult for Oak Park residents of all ages, especially when the debt seems insurmountable. In many cases, consumers who are dealing with debt make the decision to file for bankruptcy in order to get a fresh start. But is such a decision the right one for older adults who are planning to retire soon? According to a recent report from NBC News, retiring with consumer debt can be complicated. In particular, many middle-class earners who are facing medical bills in older adulthood are finding that their options are limited to retiring with debt or filing for personal bankruptcy.
Why are more people retiring with consumer debt, and what solutions might exist?
What Happens When You do Not Reach the Goal of Being Debt Free Before Retirement?
One of the most pressing questions for older adults who are nearing retirement is this: What happens when you do not reach the goal of being debt free before you retire? As the news report explains, most middle-income earners have the goal of being debt free by the point of retirement. During earning years, both parties in a marriage often work full time and contribute to paying off debt. However, many of these couples still end up with debt by the time they reach the age of retirement, from their mid-sixties and up. Some people take early retirements beginning in their 50s.
For a large number of these couples and individuals, consumer debt results from medical bills and medical emergencies. No one plans to require extensive medical treatment for cancer or other illnesses, but as we age, these issues unfortunately become more common. In some situations, people reaching retirement do decide to file for bankruptcy. But for others, it feels more comfortable to continue carrying debt.
More Retirees Have Debt Than Ever Before
One of the reasons that more people continue carrying debt into retirement is that it has become almost commonplace and, according to a research associate at the Employee Benefit Research Institute (EBRI) in Washington, D.C., it “certainly has become more acceptable.” Indeed, according to a study conducted by the EBRI, “American families just reaching retirement or those newly retired are more likely to have debt—and higher levels of debt—than past generations.” In 1998, about 53% of households with adults aged 55 and older went into retirement with debt. By 2016, that number had reached almost 70%.
In addition to medical bills, what is leading more Americans to retire with debt? Some people “upsize” instead of downsizing their homes when their children move out and they retire. As such, mortgage debt increases. To be sure, EBRI cites mortgage debt as being among “the biggest bulk of the debt.” The average debt for families aged 75 and older in 2016 was nearly $37,000.
Eradicating Debt Before Retirement
If you can, you should try to get rid of debt before you retire. There are a number of ways to make this happen. First, families should work to pay off high-interest loans. Second, individuals nearing retirement should consider downsizing and using any profit from a home sale to pay off debt. At the same time, staying in your home but using its equity to pay expenses during retirement can also help. And finally, “more people may need to cut up some credit cards before they retire and re-evaluate whether they should retire in their late 50s or early 60s.”
In the meantime, if you have questions about consumer debt or filing for bankruptcy, an experienced Oak Park bankruptcy lawyer can speak with you today. Contact the Emerson Law Firm for more information.
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Friday, June 22, 2018

Why You Should Not Wait to File for Personal Bankruptcy

When consumers in Oak Park start having significant difficult paying or their bills while accumulating more debt, the prospect of filing for personal bankruptcy can seem daunting. Some consumers feel ashamed about their financial situation, while others are concerned about the potential credit hit that could result from filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy. However, consumers often see less of a hit to their credit than they would expect, and many are able to begin rebuilding their credit soon after filing for bankruptcy. Even more importantly, as a recent article in The Coalfield Progress argues, waiting to file for bankruptcy can hurt you even more in the long run.
If you are thinking about filing for bankruptcy but continue putting it off—all while your debt load is becoming more and more unmanageable—it is important to talk with an Oak Park consumer bankruptcy lawyer as soon as you can.
Waiting to File for Bankruptcy Usually Means More Struggle
As the article explains, a recent law review study concluded that “the longer people wait to file bankruptcy, the more they struggle.” To be sure, “by the time they declare bankruptcy, their well-being and financial life are damaged, undermining the fresh start the legal tool offers them.” In short, when an individual or a couple could really benefit from personal bankruptcy, waiting to file often means that there will be greater financial struggle. That law review article, “Life in the Sweatbox,” is forthcoming in the Notre Dame Law Review.
What is a “life in the sweatbox”? As the authors of the article clarify, the period of time before an individual files for bankruptcy—but needs bankruptcy protection in order to get back on track—often is known as the “financial sweatbox.” The authors of the article relied on information from the Consumer Bankruptcy Project and determined that more people are living in the “sweatbox” for longer periods of time than they were previously. For those individuals, bankruptcy might not be quite as helpful as it could have been had they simply decided to file earlier.
Long Strugglers and the Difficulty of Time in the Sweatbox
Almost everyone who waits to file for bankruptcy struggles in some capacity, but some experience this struggle more than others. In particular, the authors of the article identify a group known as “long strugglers,” or “those people who struggle for more than two years before filing bankruptcy.” For those individuals, “their time in the sweatbox is particularly damaging.” For example, long strugglers often suffer stress and anxiety surrounding the following:
  • Constant calls from debt collectors;
  • Living without healthcare;
  • Living without utilities in their home;
  • Living without adequate food and nutrition; and
  • Losing their homes to foreclosure.
The takeaway message is this: If you are struggling financially and are considering bankruptcy, do not wait to talk to a consumer protection advocate about your options. Filing for bankruptcy sooner can help you to get the fresh start you need without sustaining further damage to your financial and physical health.
Contact a Bankruptcy Lawyer in Oak Park
To learn more about how bankruptcy can help, you should reach out to a bankruptcy attorney in Oak Park. An advocate at our firm can discuss your options with you today. Contact the Emerson Law Firm for more information.
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Friday, June 15, 2018

Slow Wage Growth and Consumer Debt

Since the foreclosure crisis in 2008, many consumers across Oak Park, Illinois and throughout the country have worried about whether another consumer debt crisis could occur. According to a recent report from NBC News, slow wage growth combined with added consumer debt suggests to some that another consumer debt crisis could be lurking. As the report points out, “subprime borrowers in particular aren’t as resilient when it comes to surviving a financial shock.”
What do you need to know about the link between slow wage growth and the possibility of a looming consumer debt crisis? Could this result in another foreclosure crisis?
Slower Wage Growth Than Expected Could Lead to Consumer Problems
Workers in the United States have certain expectations with regard to wages, and according to the report, it is likely than many expected to be earning more than they currently earn. As a result of wage-earning expectations, many of those consumers have taken on additional credit card debt and other forms of debt, assuming that an increase in wages would allow them to pay off what they owe without getting into trouble financially. However, despite the fact that more jobs were added last month, “robust wage growth again proved elusive with an increase of just 2.7% on an annualized rate.” What this means is that “some Americans are starting to struggle financially, suggesting that workers may have added debt to their household balance sheets because they expected to be earning more by now.”
Consumer debt has risen, and by the end of March consumers owed more than $13 trillion in debt. The problem is that “more of them appear to be having trouble servicing that debt.” There have been more delinquencies on consumer accounts, too. For instance, retail credit cards have seen an increase in delinquencies, and they are now at a rate of 4.65%. Equifax points to that number as a “seven-year high” for retail credit card debt delinquencies.

Auto loan delinquencies, too, are on the rise, and have gone up by about 5%. Many of those consumers have “subprime credit scores,” and the auto lenders in particular have been “hit especially hard after expanding their activities to include more ‘deep subprime’ borrowers.”
More Americans Are Living ‘Paycheck to Paycheck,’ Which Could Lead to a Debt Crisis
Much of the news about tax cuts led average American workers to assume that they would be making more money in 2018 and afterward, and that they would be able to pay off more consumer debt. However, in practice, that assumption has proven false. Even though the number of jobs has increased, many of those positions actually have gone to part-time or unskilled laborers, and as a result “about 40% of the U.S. population is living paycheck to paycheck.”
What this means is that another consumer debt crisis could occur. With many subprime borrowers, even a small financial shift could result in the inability to make monthly payments on debts. For some of those borrowers, Chapter 7 bankruptcy or Chapter 13 bankruptcy could help those individuals. At the same time, however, large-scale consumer financial problems could lead to larger economic issues.
Contact an Oak Park Consumer Bankruptcy Lawyer
If you have questions about filing for consumer bankruptcy or managing debt, an experienced Oak Park consumer bankruptcy attorney can help. Contact the Emerson Law Firm for more information.
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