Smith & Weer Attorneys at Law | Central Illinois

Debor Prisons – Alive and Well?

Ed Weer — Tue, 13 Dec 2011 03:36:31 +0000

Recently, on National Public Radio (“NPR”), I listened to a news report about debtor prisons. Debtor prisons were notorious in years past as being jails, or prisons where people who could not pay their debts were placed as a form of punishment. NPR reported that debtor prisons were once again being utilized by the courts as punishment for people who didn’t pay their debts.
One lady reported that she failed to attend a court hearing brought against her by someone she owed money. She reported that she did not receive any notice of the legal action, but that one day she was stopped, arrested and placed in jail. She remained there for four days until a relative was able to post the bail necessary for her release. I couldn’t believe what I was hearing.
Is is possible to be arrested if one doesn’t pay his bills? Yes, it is, but only under certain, limited circumstances. What happens is this: a creditor to whom you owe money may decide to sue you for the balance owed. You are then issued a summons to appear in court, along with a copy of the complaint stating the allegations of the amount owed, and the fact that you have not paid. If you do not appear to defend yourself, a judgment will be entered against you. If you fail to appear at this first apperance, will you be arrested? The answer is no. But, a judgment will be entered against you. When a judgment is entered against you, the creditor may then file what is called a citation to discover assets. You will be served with a copy of this citation. The purpose of a citation to discover assets is to discover what assets you may have which can be used to satisfy, or pay, the judgment. At the bottom of the citation are words to the effect that “if you fail to appear at this hearing on the citation, a warrant may issue for your arrest.” And, if you don’t appear to answer the citation to discover assets, that is likely what will happen. A warrant will be issued for your arrest by the judge. Under these circumstances, you will be arrested and placed in jail. You will remain in jail until bond is posted for your release, or the judge determines that, after a sufficent period of time, you are unable to post the necessary bond. Arrest warrants can also be issued if you fail to appear following a petition filed to hold you in contempt for not doing something you were ordered to, such as making an installment payment on a judgment that was issued against you.
Some people who are arrested swear that they were never served with notice of the hearing. That, they say, is the reason they did not appear even when a citation to discover assets was filed against them. Although, I have heard stories of this nature, it is rare that a hearing is scheduled without notice being served upon the party being charged.
No one wants to go to jail, and suffer the hardship of obtaining bail, or the embarrassment of being locked up. However, it can happen. But, it shouldn’t happen if someone is not properly notified. If someone is not notified of a court hearing intentionally, that is an abuse of process and something which, if proven, can be a cause of action against the party who proceeded without giving the proper notice.
Filing bankruptcy can put a stop to actions to obtain a judgment against you. Bankruptcy, by operation of its automatic stay, can prevent issuance of a citation to discover assets, and if filed in time, can even stop someone from being arrested if he or she fails to attend a citation to discover assets. Once a bankruptcy is filed, any action to collect a debt must cease immediately. My advice is don’t wait until a bench warrant is issued for your arrest. Take the initiative. If a creditor has started the process of taking you to court to collect a debt that you know you are unable to pay, take legal action immediately. See a qualified bankruptcy attorney and find out about your rights. If left unattended, an action against you to collect a debt could lead to serious consequences, it could even lead to you being arrested. Take action now to avoid such consequences.

In Denial About Filing Bankruptcy

Ed Weer — Sat, 10 Dec 2011 17:14:51 +0000

Thinking it’s not going to happen, that you’ll find a way out? Are you borrowing from Peter to pay Paul, planning on borrowing from your 401(k), or taking out a second mortgage to eliminate your debt problems? It’s not going to happen, the boat is sinking. Don’t make it worse by jeopardizing your retirement or the roof over your head.
Simply stated, filing for bankruptcy is not the problem. Filing for bankruptcy is doing something about the problem. The problem is too much debt and not enough income to make ends meet. Too much debt without enough income leads to negativism. You start to take it out on the ones you love most, it can and does affect your ability to concentrate at work, and worse of all, it can affect your health. Do something about it.
Filing bankruptcy is a financial decision. Filing will eliminate your debt, and free up cash. It will allow you to turn your negative thoughts into positive ones. There are no long term feelings of guilt. You will be able to get loans in the near future. You may have to pay a higher interest rate, but that higher interest rate expense will be more than offset by eliminating the outrageous debt load you’re now paying. You’ll be smarter this time around with the amount and terms of your borrowing. You’ve learned something in the process. The end result is you’ll be money ahead, and feeling better about yourself.
I don’t refer to filing bankruptcy as “financial planning”. You didn’t plan on being in this mess, and you don’t plan on filing again. Once you get over the denial, make the decision to do something about your debt problems. The sooner the better. Pick up the phone and call a lawyer to find out more. You’ll be glad you did.

WAITING TOO LONG TO FILE BANKRUPTCY IS A MISTAKE

Ed Weer — Wed, 30 Nov 2011 03:06:47 +0000

Many times I see people in my bankruptcy practice wait too long to file bankruptcy. There’s a sense on their part that filing bankruptcy is like giving up, or it is not the right thing to do. They do everything possible to avoid filing bankrutpcy.
This can be a mistake. Why? Take for instance the client who decides to borrow against, or cash out her 401(k) retirement account to catch up overdue credit card bills. This is a mistake becaue this person is depleting her retirement account and jepordizing her retirement.
Consider next the person who takes out a second mortgage on his house to catch up past due bills. This is a mistake because the second mortgage wipes out any equity the homeowner may have in his home. He is now stuck with a long-term obligation, the second mortgage, that has to be paid along with the first mortgage.
These people may be taking one step forward by reducing short term debt, but they are taking two steps back by reducing their retirement savings, or by sinking their home further into debt.
Whether or not to file bankruptcy is not a moral issue, it is not a matter of right or wrong. It is a financial decision. Everyone should make financial decisions intelligently. It is not intelligent to rob your retirement account to pay short term, high interest debt. It is not smart to risk losing you or your family’s home with a second mortgage.
Make the tough, smart decision when these circumstances present themselves. Don’t wait too long. Consult with a lawyer about the advantages and disadvantages of filing bankruptcy. A little information is well worth the time it takes to make an appointment with a qualified legal expert. You may be surprised by what you learn. You’ll be happy you did, and likely, you’ll be money ahead. Do the smart thing.

A New Type of Loan Lowers the Cost of Reverse Mortgages

Ed Weer — Sun, 06 Feb 2011 19:27:49 +0000

There is a new reverse mortgage loan called the Home Equity Conversion Mortgage Saver. This new loan only requires the borrower to pay insurance for the loan in the amount of .01% of the home’s value. The traditional reverse mortgage loan known as Home Equity Conversion Mortgage required the home owner to pay as much as 2% of the home’s value as insurance for the loan. The lower up- front cost is being offered in exchange for limiting the amount of money the home owner can borrow against the home. Both types of loans are insured by the Federal House Administration (FHA), which backs the vast majority of the reverse mortgage market.
A simple example illustrates the cost savings offered by the new Home Equity Conversion Mortgage Saver. On a $400,000.00 home, the cost of insurance for the Saver loan is $40.00 versus $8,000.00 for the traditional Home Equity Conversion Mortgage. As stated above however, the amount that may be borrowed against this same home will be 10% – 18% less than under the more costly traditional loan, depending on the age of the borrower. At recent interest rates, a 72 year old may borrow only $192,875.00 under the Saver loan, compared to the amount of $246,398.00 under the traditional loan.
The reasons for taking out a reverse mortgage vary. The elderly, who live on a fixed income, may not be able to pay their everyday living costs. In this instance, a reverse mortgage helps to supplement the fixed income. Younger homeowners – those in their sixties -, who may have lost one or more jobs in the recession, may choose to borrow against the equity in their home to make it through these tough times. One thing is for sure; taking out a reverse mortgage to pay for luxury items, such as an expensive vacation is not a good idea. Another thing to avoid are salespeople who tempt you into placing the money borrowed into risky, questionable investments. The best advice is to shop around for the best deal, and for someone you can trust.
For more information about reverse mortgages, visit the National Council on Aging (NCOA). The NCOA offers free advice for anyone considering a reverse mortgage. Go to www.reversemortgageadviser.com.

How Can I Improve My Credit Score?

Ed Weer — Sat, 29 Jan 2011 18:59:38 +0000

Want to improve your credit score? Here are some suggestions from www.myfico.com:

1. Keep balances low on credit cards and other revolving credit.

2. Pay off debt rather than moving it around.

3. Pay down revolving credit. Owing the same amount but having fewer open accounts may lower your score.

4. If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly.

5. New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information.

These and other suggestions like paying debts on time, and keeping the amount of debt to a reasonable proportion of income, will serve to give you a higher credit score. The higher your score, the lower the interest rate you should expect to be quoted when applying for a new loan. Keeping interest rates low can save you thousands of dollars over the life of a loan.

If My Car Is Repossessed Can I Get It Back By Filing Bankruptcy

Ed Weer — Fri, 14 Jan 2011 22:55:15 +0000

Yes, you can if you act quickly. How quickly depends on what state you live in. In Illinois, you must move to reinstate your car loan within 21 days of receiving notice from the car lender of your rights to reinstate pursuant to Section 3-114 of the Illinois Vehicle Code. In order to reinstate your car loan, you must pay all amounts due at the time of reinstatement, cure all nonmonetary defaults and pay the reasonable costs of the repossession. What if you can’t pay all these amounts in one lump sum? Most people can’t. Then, Chapter 13 bankruptcy may provide the answer.

How can Chapter 13 permit you to regain your car? All the amounts required to be paid by the Illinois Vehicle Code for you to get back your car – the amount you’re behind on your car loan, plus the other expenses – may be paid over time through a Chapter 13 bankruptcy. A Chapter 13 bankruptcy plan lasts from 3 to 5 years. The length of the plan you choose may make your ability to regain your car affordable. Once your Chapter 13 case is filed, the bankruptcy court assumes control of your case, and of your car loan. Your car may not be taken again without the court’s permission, provided you make your Chapter 13 plan payments on time. As long as you continue making your Chapter 13 plan payments, the default on your car loan will be cured, and you will be able to keep your car.