Chicago Bankruptcy Attorney Answers 5 Typical Questions

1. I owe back child support.  Will my bankruptcy eliminate that debt?

Child support is one debt which is never dischargeable.  Filing Chapter 7 will not eliminate your obligation to pay that back child support.  This is absolute.

2. Are you sure that I will not lose my home?

As long as the amount of equity in the house falls within the exemption amount and you
are able to continue to make the monthly payment, then you will be fine.  You will not lose your house.  In Illinois, if you have less than $15,000 in equity in your home and you can continue to make your monthly mortgage payment, you will not lose your home.  I will say it one more time; you will not lose your home.

3. What does it mean to reaffirm a debt?

Reaffirming a debt is putting yourself back on the hook for a debt that would otherwise have been discharged in your bankruptcy.  In Illinois, this is typically done with automobiles.  What you are doing is you are saying I want to continue with my contract price, my contract monthly payment or a new payment negotiated by the attorneys in order to keep the car.  If you were to fail to make the monthly payments or defaults on the loan at a later date, this bankruptcy would not eliminate that debt.  You would be liable for any deficiency judgment on the car.

4. Why do I need credit counseling if I am filing for bankruptcy?

The simple answer is the new law which was passed in 2005 requires debtors take a pre-bankruptcy debtor education credit counseling course before filing and a second credit counseling class after filing, before discharge.  Congress’ hope was to steer people away from bankruptcy by making them look at non-bankruptcy options.  This, however, was a fool’s errand and has really turned, in a practical sense, is nothing but a hoop for people to jump through in order to file for bankruptcy.

5. How long does evidence of my bankruptcy stay on my credit report?

Your bankruptcy filing may be included on your credit report for up to 10 years.  But this really ceases to matter after about two or three.  If you listen to my earlier memos, you would have heard that we’ve seen people get new cars from about six months after bankruptcy at good interest rates, and new houses about 18 to 24 months after bankruptcy.  Just the fact that you have a bankruptcy listed on your credit is not a death nail to receiving more credit. 

But one thing to be aware of is companies that will remove things from your credit report or claim to remove things from your credit report.  As most of these companies are doing things that are not above board and in some cases illegal.