LAW OFFICES OF THOMAS W. DREXLER

BANKRUPTCY, the New Law:

As a lawyer, under the new law, I am required to advise you that: I am a Debt Relief Agency, and I help people file for Bankruptcy Relief.

As most people are now aware, there were massive changes made to the bankruptcy law effective this past October, 2005. Many people believe that they are no longer able to file bankruptcy. This is not true. In Illinois, in fact, the state legislature reacted to the new bankruptcy law by increasing exemptions, that is, the amount of property you can retain and still file bankruptcy. Virtually all the exemptions allowed under Illinois law were doubled effective January 1, 2006.

What the new law has done, however, is made bankruptcy filing much more complex, putting in place a number of roadblocks and various traps for the unwary. It definitely has made these cases much more difficult and timeconsuming for attorneys. Nonetheless, virtually everyone who could file for bankruptcy before can file for bankruptcy now. What is most important is to hire an attorney to represent you who is sufficiently knowledgeable to properly assess your situation and advise you as to what is best for you.

TYPES OF BANKRUPTCY CASES:

For most individuals, there are 2 types, or Chapters, of bankruptcy for which they are elegible, Chapter 7 and Chapter 13. For individuals with a large amount of debt, a Chapter 11 may be required instead of a Chapter 13.

CHAPTER 7, individuals:

Chapter 7 is a "straight bankruptcy," where your bills are "discharged," or released without a payment plan. You only pay for your court filing fee (currently $299.00) and your attorney's fee, which may vary depending on your situation. Even when you file Chapter 7, you will still owe certain debts, such as child support and maintenance, certain government taxes, and student loans. You should discuss your debts carefully with your attorney to make sure you know which debts will not be discharged. You nust also be aware that filing a Chapter 7 will not allow you to stop making payments on a house or car or other secured debt if you want to keep that item. You will have the choice of either letting the property go and not owing the money anymore, or electing to keep the property and make payments on it (generally this is called "reaffirmation").

You must understand before you file for Chapter 7 that the amount of property you own and the equity you have in that property are very important considerations to make to determine if a Chapter 7 proceeding is appropriate for you. Many people have filed Chapter 7 without being properly advised and have had their property sold in the bankruptcy so payment could be made on their debts.

CHAPTER 7, Corporations:

Corporations which file for Chapter 7 are no longer eligible to conduct business when they file. The trustee appointed by the bankruptcy court to the case will typically examine the corporate records, determine if there are any assets or claims which might have some value, and will liquidate them on behalf of creditors.

Chapter 13 is a payment plan, often referred to as a "wage earner" plan. Under these cases, you pay back a certain percentage of your debt, generally from 10% up to 100%. Your monthly payment and the length of your case is based on your individual circumstances, and can only be determined after a thorough analysis of your debt, your income, your equity in your property, and other matters affecting your financial status.

People choose to file Chapter 13 for a variety of reasons. One of the most common is when their property is in foreclosure. In general, the filing of a Chapter 13 will immediately stop a foreclosure case and a foreclosure sale if done properly. After your case is filed, to retain your home, you must make your regular monthly mortgage payments plus a Chapter 13 payment to catch up the amount past due on your mortgage. Failure to make timely payments AFTER your case is filed may result in the foreclosure case starting up again.

A Chapter 13 can also stop the repossession and sale of your car. Car payments will typically be adjusted and become part of your Chapter 13 payment.

Chapter 13 Plan acts as a debt consolidation, that is, all your debts will be handled through one monthly payment. You remain responsible to pay directly on your own your regular monthly living expenses (food, gas, insurance, etc.) and usually your mortgage payment.

Chapter 13 plan typically runs a minimum of 36 months but not more than 60 months.

Besides the advantage of stopping a foreclosure or repossession as discussed above, a Chapter 13 will give you the ability to become debt free. A person who owed $20,000.00 in credit cards with an average interest rate of 20% might only be able to afford to pay $350.00 per month on that debt, and it would take over 15 years to pay it off. In a Chapter 13, without that interest building, and with the potential of a less than 100% plan, a person might be able to resolve that debt in 3 years even with a lower payment.

CHAPTER 11:

Chapter 11 cases are somewhat similar to Chapter 13 cases in that a repayment plan is typically proposed. Corporations are not eligible to file for Chapter 13, and individuals with debt over a certain limit are not eligible for Chapter 13 either.

Chapter 11 cases, due to the way they are administered by the court and due to various complicated requirements, are much more time consuming and expensive than Chapter 13 cases.

A corporation, or business owner, will often file Chapter 11 to stop (or stay) an action by a lender or creditor which would have the effect of crippling or destroying the business. For example, a corporate loan might be in default and the lender may be proceeding to repossess the corporation's equipment. Without its equipment, obviously, the corporation couldn't make its product anymore and would be out of business. The Chapter 11 filing will hopefully give the corporation time to work out a plan of reorganization which will appropriately deal with its creditors and allow the corporation to remain in business.