PODCAST – Bankruptcy Basics: Taking the Mystery Out of The Median Income/Means Test

What may seem to be the simplest of cases turns out to be more complicated than a client can imagine. Filing a bankruptcy on your own is pennywise and pound foolish. The peace of mind of knowing the case is done properly from the outset is worth far more than the cost of the attorney fees. Our consultations are always free.

On today’s episode of the Chicago Bankruptcy Update show, we take the mystery out of the median income/means test to qualify for bankruptcy.

Click here to listen to the podcast recorded 02/18/2014.

Bankruptcy issues covered on this show:

1) How does the Chapter 7 means test limit bankruptcy protection to only the individuals who need it?

2) What happens if your income is more than the median income but you still cannot pay your debts?

3) If I repay or agree to repay some of my debts, can I then pass the income means test for Chapter 7?

4) If I do pass the income means test, under what circumstances is a bankruptcy most beneficial?

Chicago bankruptcy and consumer credit attorney Joseph Wrobel shares news and updates in bankruptcy law as well as business and consumer financial matters. It has been documented that financial troubles can cause all sorts of ailments, the most common of which is sleeplessness. Joseph Wrobel helps clients alleviate their anxiety created by the inability to pay bills and the embarrassment of financial distress.

Joseph Wrobel has been a practicing attorney since 1973 and has experience in a wide variety of law relating to legal matters for individuals and families. Wrobel helps clients get out of debt and get a fresh start. He is an active member in several bar associations and the Bankruptcy Panel of Pro Bono Program of the Chicago Volunteer Legal Services. After serving the U.S. Army Reserve 363rd Civil Affairs Unit, Wrobel earned a B.A. in Psychology from Northwestern University and in 1973 he earned a JD from DePaul University Law School.

Visit our Chicago Bankruptcy Site online for more about the firm.

Everyone might want to know what most people experience when filing for bankruptcy protection

Filing bankruptcy will provide debt relief, eliminate bill problems and stop creditor harassment.
Filing bankruptcy will provide debt relief, eliminate bill problems and stop creditor harassment.

All clients at Joseph Wrobel, Ltd. will meet with an experienced bankruptcy attorney who will help them evaluate their entire current and near future financial picture to determine which chapter of bankruptcy protection (Chapter 7 or 13 most often) would help solve the client’s financial crisis. If it does not make sense to file a bankruptcy petition, clients will be offered other financial and credit repair options. Clients who are ready to proceed are given a list of instructions on what to do next so the attorneys can move forward with the bankruptcy with very little further action required of the client.

Everyone deserves a fresh start and most people who have already received a bankruptcy discharge would tell you the experience was more comfortable than expected.

Most people are not going to find out you filed for bankruptcy protection unless you tell them. While some local papers in smaller towns might print the names of local residents who have a bankruptcy filing, most of the clients in the Chicagoland area will proceed through bankruptcy without friends and neighbors knowing.

Most of your debts will be eliminated if you file a petition for a Chapter 7 discharge. Certain debts, as a Joseph Wrobel, Ltd., attorney will tell you, cannot be discharged. Examples of non-dischargeable debts include student loans, child support and maintenance.

Want to stop the annoying phone calls by credit card companies and bill collectors?

Most of the annoying collection phone calls will stop. While bankruptcy cannot eliminate all unwanted phone calls, the collection agencies who love calling during lunch and dinner will have to stop bothering you because of the “automatic stay” provision. While the bankruptcy case is active, there is a federal order of the bankruptcy court that “stays” (prohibits) collection activity including those annoying phone calls.

Most of your personal belongings, your car, 401(k) account, and the equity your home can still be yours after a bankruptcy discharge. If you live in the State of Illinois, there are homestead exemptions allowing you to keep equity in your home, a vehicle and other personal property up to a certain amounts. When you have certain assets worth more money than exemption limits, and when you have assets you consider irreplaceable, a Chapter 13 bankruptcy will give you options not included in the Chapter 7 full discharge most people think about when considering bankruptcy.

Anyone can make a full financial recovery from a bankruptcy in less time than many people think.

Most people can get credit cards (pre-paid credit and debit cards are easy to obtain) and buy homes and cars on credit within a few years of a bankruptcy discharge. Do not think that a bankruptcy means you are giving up and throwing in the towel. By eliminating debt you were never going to be able to pay, you get fresh start to rebuild your assets and credit rating, a fresh start.

The attorneys at Joseph Wrobel, Ltd. are available to talk to you and answer most of your questions over the phone and will treat everyone with the respect and dignity they deserve, despite their temporary financial circumstances. If you want to learn more about bankruptcy and credit management, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.

Credit scores, cards and reports: What you might not know

Credit cards and our credit scores have become parts of our lives and daily business to the extent that losing them can paralyze people experiencing financial hardship. Financial troubles leading people towards a bankruptcy filing are not always the individual’s fault. A divorce, injury or job loss can happen and leave good people in peril with their credit scores and credit cards. There is a saying among bankruptcy attorneys – what happens after the bankruptcy is more important than what brings the client to seek bankruptcy in the first place. There are plenty of options to restore credit and the ability to make online payments. Do not give up and throw in the towel or go off the grid because creditors suggest that if you file bankruptcy you will never be able to swipe a tank of gas or cover an emergency expense.

Why is credit important and why do we need credit and debit cards to pay?

Fair or unfair as it may seem, the American system of issuing credit is what keeps the economy moving. Do you remember the problems our country experienced at the beginning of the recession? One of the biggest problems was failure and refusal of banks to issue credit for consumer goods, homes, cars, and to businesses with fixed expenses. The method of payment nowadays is plastic. We pay our bills online and over the phone using debit and credit cards. When was the last time you went to a local utility to pay with cash or check? The reality is that it is easier and sometimes only possible to pay using plastic. People considering bankruptcy should know there are easy alternatives to what we often think about when talking about credit and debit cards.

Filing for bankruptcy in most cases will not affect most people’s checking accounts and the debit cards used to pay for bills and daily expenses. If however, the account is overdrawn and no payment is made, the account can be sent to collections and opening a new account could be difficult. An alternative is the pre-paid debit cards now offered by many banks. They work just like a traditional checking account based debit card. A difference can be that the pre-paid cards, just like gift cards, prevent the user from overdrawing the account. Prepaid debit cards holders can access their accounts online, deposit, withdraw funds, and continue despite credit and bank account options.

Pre-paid credit cards, also known as secured credit cards, are similar to prepaid debit cards with the exception that the applicant prepays a certain amount (often under $500) and that money is held in a separate savings account. The card is “secured” by the deposit and the use may proceed to use the card just like a regular credit card and pay the monthly bills. If the bill is not paid, the deposit is forfeited. A major benefit of the pre-paid credit card is the positive effect on the credit score. If the person is in a bankruptcy and some of the immediate financial pressure is off, it is easier to use the pre-paid credit card for common monthly bills. As the credit card is used and paid in a responsible manner the credit score should improve.

Getting back on track can also include challenges to inaccuracies on credit reports.

In cases where damage to credit scores are a provable fault of another, the damage to the credit score can be translated to a specific dollar amount using a credit damage expert who prepares a report for court hearings where the credit damage is at issue. There are also credit repair companies who, for a reasonable fee, help people find and attack inaccurate marks on a credit report including something referred to as “zombie debt,” which often indicates collection amounts that are frequently bundled and sold among collection companies. Note that debt repayment companies offer different services and it is important to get the right answers before making important decisions that can affect the future.

How can Joseph Wrobel help?

Joseph Wrobel and the attorneys at Joseph Wrobel, Ltd. have relationships and can help clients with everything from stopping harassing collector calls to helping clients get new forms of debit and credit cards to keep moving and paying bills as well as attack bad credit report marks and scores.

If you want to learn more about bankruptcy and credit management, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.

What should we know about unsecured debt when considering bankruptcy?

Most unsecured debts are the common bills we all incur such as credit card debt, medical bills, student loans, utilities, unpaid rent and taxes.
Most unsecured debts are the common bills we all incur such as credit card debt, medical bills, student loans, utilities, unpaid rent and taxes.

Unsecured debts are the debt obligations we incur that are not secured by property like an automobile or home. Secured debts, on the other hand, are protected by the collateral connected to the loan. If you do not pay your car loan, the bank may obtain a court order to seize and repossess the car if you default. Likewise, with your home, unpaid mortgages can be collected by foreclosing on the home. With the unsecured debts, the unpaid creditor can send your file to collections or file a lawsuit to obtain a money judgment to enforce and collect the money owed. If the creditor enforces a judgment, they may attempt to seize money in your bank account or another asset. Filing a petition for bankruptcy protection under Chapter 7 or 13 can stop seizures and collections of money judgments for unsecured debts. See our blog article discussing the automatic stay provision of the bankruptcy code. The automatic stay prevents collectors from continuing any collection activity during a bankruptcy case.

What are the typical types of unsecured debts and how to banks and creditors collect them?

Most unsecured debts are the common bills we all incur such as credit card debt, medical bills, student loans, utilities, unpaid rent and taxes. If you do not pay the unsecured debts most creditors call you frequently to negotiate a payment or some sort of arrangement to bring the debt current. Some creditors will accept a lesser amount than what is due, but be careful because you may find that the forgiven amount ends up being taxable income to report to the IRS.

If you fail to respond or negotiate a fair deal with the creditor, they will most likely send their unpaid account to a collection agency. These phone calls will make most people’s hair stand on end. The collectors are often rude and will try to trick you into doing something foolish such as paying them from your 401(K) retirement funds – don’t do it! Qualified retirement accounts are safe and in most cases, creditors cannot seize and collect that money. The collectors will also likely tell you, if you suggest you are considering a bankruptcy, your financial life and future will come to an abrupt end – also not true! In fact, many people who do seek protection from the bankruptcy courts are able to borrow money, establish credit and finance cars and homes within a few years of a discharge.

In the event you and the collection companies cannot strike a deal, or you dispute the validity of the debt they are trying to collect, your creditor may file a lawsuit against you. A local county sheriff or special process server will likely stop by your home or place of employment to serve you with a summons to appear in court to answer the complaint they file with the court asking for a money judgment. At that point, you can appear in court, by yourself or with a lawyer, and try to settle the lawsuit. If you decide not to appear and do nothing, the court may continue your case one time or enter a default judgment against you. Eventually the creditor will obtain a money judgment and start enforcement.

How can bankruptcy laws protect you from unsecured creditors, collectors and court judgments?

Most unsecured debts can be completely eliminated or reduced in either a Chapter 7 or 13 bankruptcies. Again, as soon as a bankruptcy petition is filed, the creditors must stop almost all collection activity. To learn more the basics of bankruptcy you can listen to several 30-minute podcasts in which Joseph Wrobel explains a variety of bankruptcy subjects – click/tap here for the page on the firm’s website with links to the podcasts. Many people will tell you that the most important thing about a bankruptcy is what you do after a discharge, meaning keeping up with bills and not getting behind unmanageable debt anymore. After a bankruptcy, if you owe less money to creditors, you may look more creditworthy. Many people start re-establishing their credit buy easily obtaining a secured credit card to use for gas, grocery and basic daily living expenses.

If you want to learn more about bankruptcy proceedings, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.

Examples of the automatic stay and how it operates in bankruptcy law

“Automatic stay” is protects you from creditors during bankruptcy. While a bankruptcy case is active, be that a Chapter 7 or 13, no creditors or collectors may contact or harass the individual or organization in bankruptcy. Specifically the definition of automatic stay on the U.S. Courts official website is, “An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.[i]” As soon as creditors receive the initial notice of the bankruptcy, they may not continue any collection activity during the bankruptcy case or they would violate the automatic stay, a federal offense.

Examples of protections from creditors during an automatic stay.

Many individuals and business owners seek the protection of bankruptcy laws and the automatic stay provision to prevent multiple wage garnishments, evictions and foreclosures. In addition, some people worry their utilities might be disconnected. The automatic stay applies to these scenarios in varying degrees. For example, if the electricity is about to be cut off it might make sense to prevent a disconnection for at least 20 days. Garnishments also hurt the ability to keep up with the bills. No more than 25% of an individual’s wages may be garnished directly, but when multiple creditors come calling with garnishments, the automatic stay may look really good to someone who really doesn’t want the human resources department at work getting involved in responding to multiple creditors.

Examples of automatic stay limitations and ways creditors and collectors try to get around the law.

When the tax man shows up at your door you cannot send him away with an automatic stay. In fact, the IRS may audit you, issue tax deficiency notices and otherwise use all the available tools at their disposal to proceed with taxing you. Notwithstanding, the IRS may not seize your income or property while you are in bankruptcy with an active and enforceable automatic stay. The automatic stay does not affect Child support and matters affecting the family. Likewise, a criminal court may proceed with matters involving the criminal component of certain actions involving debts and an order to pay a fine or comply with court orders may still be effective despite the automatic stay. Additionally, multiple bankruptcy filings and violations of bankruptcy court rules can affect the automatic stay.

Just as a petitioner, seeking the protection of the automatic stay wants to maximize their rights under the law, the creditor and collector on the other end may seek to circumvent the automatic stay and find a way to collect their debt and proceed under an exception to the law. An experienced bankruptcy attorney can help clients whose creditors ask the bankruptcy court to “lift” the automatic stay when they argue to the court that the automatic stay is not being used within the spirit of the law and legislative purpose the stay intends to satisfy.

Chicago attorney, Joseph Wrobel, has decades of experience working with complex bankruptcy issues including those touching on automatic stay issues and the legal challenges that can arise, including violations of automatic stay and federal bankruptcy laws. To learn more about bankruptcy and your options, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel, Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.


[i] U.S. Courts Website Glossary.

Bankruptcy Basics: What Happens at the Meeting with the Trustee?

MEDIA RELEASE

Bankruptcy Podcast Series

By Joseph Wrobel, Ltd.

On today’s program, we cover bankruptcy basics, focusing on what happens at the meeting with the trustee.
On today’s program, we cover bankruptcy basics, focusing on what happens at the meeting with the trustee.

Chicago bankruptcy and consumer credit attorney Joseph Wrobel shares news and updates in bankruptcy law as well as business and consumer financial matters. It has been documented that financial troubles can cause all sorts of ailments, the most common of which is sleeplessness. Joseph Wrobel helps clients alleviate their anxiety created by the inability to pay bills and the embarrassment of financial distress. On today’s program, we cover bankruptcy basics, focusing on what happens at the meeting with the trustee.

CLICK/TAP HERE TO LISTEN (Listen Live 12/20/2013 at Noon CST or Recorded Anytime Afterwards On Demand)

Bankruptcy issues covered on this show:

1) What is a meeting with the trustee meeting, also known as a 341 or creditors, meeting?

2) What are the specific purposes for trustee meetings in Chapter 7 and Chapter 13 cases?

3) How should I prepare for meeting with the trustee, who will be there and what will I be asked?

4) What happens after meeting with the trustee, and may you challenge a trustee in disagreement?

Joseph Wrobel has been a practicing attorney since 1973 and has experience in a wide variety of law relating to legal matters for individuals and families. Wrobel helps clients get out of debt and get a fresh start. He is an active member in several bar associations and the Bankruptcy Panel of Pro Bono Program of the Chicago Volunteer Legal Services. After serving the U.S. Army Reserve 363rd Civil Affairs Unit, Wrobel earned a B.A. in Psychology from Northwestern University and in 1973 he earned a JD from DePaul University Law School.

Visit our Chicago Bankruptcy Site online for more about the firm.

Bankruptcy Basics: Why So Much Information?

Listen and learn valuable tips in getting your finances organized so you attorney can help you get ahead!
Listen and learn valuable tips in getting your finances organized so you attorney can help you get ahead!

Chicago bankruptcy and consumer credit attorney Joseph Wrobel shares news and updates in bankruptcy law as well as business and consumer financial matters. It has been documented that financial troubles can cause all sorts of ailments, the most common of which is sleeplessness. Joseph Wrobel helps clients alleviate their anxiety created by the inability to pay bills and the embarrassment of financial distress. On today’s program, we cover bankruptcy basics, focusing on disclosure of assets, income and expenses, debts and transfers so the attorney can provide the correct advice without full disclosure.

CLICK/TAP TO LISTEN

Bankruptcy issues covered on this show:

1)      Listing and disclosing proper assets to your attorney with supporting documentation.

2)      Identifying and listing in categories your individual and business income and expenses, if any.

3)      Reviewing and sharing evidence of past debts your attorney will include in the bankruptcy filings.

4)      Categorizing and reporting any transfers of assets by gift or sale so your attorney can address them.

Joseph Wrobel has been a practicing attorney since 1973 and has experience in a wide variety of law relating to legal matters for individuals and families. Wrobel helps clients get out of debt and get a fresh start. He is an active member in several bar associations and the Bankruptcy Panel of Pro Bono Program of the Chicago Volunteer Legal Services. After serving the U.S. Army Reserve 363rd Civil Affairs Unit, Wrobel earned a B.A. in Psychology from Northwestern University and in 1973 he earned a JD from DePaul University Law School.

Visit our Chicago Bankruptcy Site online for more about the firm.

Produced by Nick Augustine PR

When can I file another bankruptcy petition?

So, should/would/could I file another petition even though I won’t be eligible for a discharge? Maybe.
So, should/would/could I file another petition even though I won’t be eligible for a discharge? Maybe.

“I know I want these calls to stop. I really need to get this done. Maybe I’ll put it off until I have more debt to get rid of.” Does this look like a conversation in your head? Many people think about bankruptcy as their “get out jail free” card and are waiting for the right time to use it. What they might not know is that protection under the bankruptcy laws may be available more often than they realize. When does a person’s financial situation become ripe for a bankruptcy petition? If they are about to lose their home, car or other valued items, it may be time to go see a bankruptcy lawyer.

If you think about it, the periodic opportunity to discharge debts you cannot pay can be a unique experience.

Decision makers in businesses who use bankruptcy laws as strategic financial planning guidelines are well aware that the status alone of having an active petition for bankruptcy on file can keep the wolves away from time to time. This doesn’t mean being a serial filer and petition withdrawer is the best plan, but knowing the laws are there when needed helps fiduciary decision makers.

Successive Chapter 7 and 13 cases may be filed but the time frames are different. In Chapter 7, the “full discharge,” you may receive a second discharge so long as it is not within eight years of the date the first case was filed. For Chapter 13, “reorganization,” you may receive a second discharge so long as it is not within two years of the date the first case was filed. Another interesting wrinkle folds into the timing plan and the Chapter under which you first sought protection controls the timing for subsequent filings. Therefore, if you first filed a Chapter 13, you could file a subsequent Chapter 7 within six years, and conversely, if you started with Chapter 7, four years need to pass before you can file the Chapter 13 petition. Of course, there are exceptions to general rules.

So, should/would/could I file another petition even though I won’t be eligible for a discharge? Maybe.

There are several circumstances in which it makes sense to file a Chapter 13 case, for example, right after receiving a Chapter 7 discharge, commonly known as a “Chapter 20.” An experienced bankruptcy attorney can best help determine if there is a reason and opportunity for a client to seek “20” protection.[i]You need the extra time but have too much debt. If you need the extra time to cure an arrearage on a mortgage or car loan but your overall debt exceeds the debt limits under Chapter 13, filing a Chapter 7 first might help. By filing the Chapter 7, you can reduce your overall debt. Then, with your debt load reduced, you may be able to qualify for Chapter 13. Although you won’t be able to get a second discharge in the Chapter 13, the second bankruptcy filing will give you extra time to cure the arrearage on your mortgage or car loan or to pay down debts that were not eligible for discharge under the Chapter 7, such as tax debt.”

For whatever need you may have, knowing a smart bankruptcy attorney who knows the interplay of the rules for timing of filings and discharge eligibility is a best bet. Joseph Wrobel has been practicing bankruptcy law long enough to teach histories of the law and can direct you to the best course of action in resolving complex financial issues and a fresh start for you or your business.

To learn more about bankruptcy and your options, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel, Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.


[i] NOLO website: What is Chapter 20 Bankruptcy?

Fraudulent mortgage documents: About MERS listed on your Deed of Trust.

"According to Foreclosure Nation, “MERS was used by the Wall Street Banks to avoid paying county recorder fees and real estate transfer tax fees."
"According to Foreclosure Nation, “MERS was used by the Wall Street Banks to avoid paying county recorder fees and real estate transfer tax fees."

Bank: We’re going to foreclose on your home for not making timely mortgage payments. Homeowner: I dispute your foreclosure proceedings. Court: Bank, can you establish this homeowner is in violation of the mortgage agreement? Bank: Well, of course. Homeowner: I say the mortgage you seek to enforce is fraudulent, see that MERS is listed on my Deed of Trust? The website, Foreclosure Nation, offers resources including a list of criteria you can use to spot fraudulent mortgage documents. According to Foreclosure Nation, “MERS was used by the Wall Street Banks to avoid paying county recorder fees and real estate transfer tax fees.[i]” The site lists 66 items to look at when looking for mortgage fraud, and item number 66 is a long list of names who are known “robo-signers.”

A popular publication, Washington’s Blog, offers several descriptions and quotes about MERS and how it worked as a cheat. “The Mortgage Electronic Registration Systems (“MERS “) is a shell company with no employees, owned by the giant banks.[ii]” MERS was advertised in 2007 as a tax and fee-avoiding opportunity in this brochure: “MINIMIZE RISK. SAVE MONEY. REDUCE PAPERWORK.” Inside the brochure there is also a claim that “clients save money because MERS “eliminates the need to record assignments in the name of the Trustee.”[iii]

MERS is a system owned and operated by MERSCORP Holdings, Inc.[iv], the parent company. The MERS website promotes it’s system as being a technology innovation helping customers reduce processing costs and increase efficient access to information for mortgages. This national database is free to the public who can use the system to access loan servicer information. The About Us page of the site states, “MERS and MERS®Residential were created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper.[v]

In defense of its MERS system and public image, the “In the News” page on the MERS website promotes various news articles praising MERS as well as examples of court decisions in favor of MERS[vi]. On the other side of the PR spin many “Judges, lawmakers, lawyers and housing experts are raising piercing questions about MERS…whose private mortgage registry has all but replaced the nation’s public land ownership records,” according to a 2011 New York Times article on point[vii]. While it is likely that investigations into MERS activity caused reform to the system, there are likely many undiscovered no document mortgages in circulation. The bundling and sale of mortgages and claims of title can make it very difficult to know who owes what to whom.

Bankruptcy attorneys often meet with new clients facing foreclosure and they want to know if their mortgages are valid and whether they were part of a fraudulent mortgage transfer. If the bank can’t prove they own the mortgage, what happens to the homeowner and the property? An advantage to filing for bankruptcy protection under Chapter 7 or 13 is the automatic stay provision to stop foreclosure proceedings while you and your attorney further investigate the history of debts and obligations.

Attorney Joseph Wrobel is a veteran bankruptcy attorney who has worked through many complex challenges facing clients trying to keep their home and recover from a disastrous life event such as being a victim of mortgage fraud.  To learn more about mortgage fraud, mortgages generally, and keeping your home, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel, Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.


[i] Foreclosure Nation: How To Spot Fraudulent Mortgage Documents. By Max Gardner.

[ii] Washington’s Blog: States Fight Back Against MERS Mortgage Fraud. By Washington’s Blog, Apr. 7, 2013.

[iii] See Washington’s Blog cited herein.

[iv] Website: MERSCORP Holdings, Inc.

[v] Website: MERS – About Us.

[vi] Website: MERS – In the News.

[vii] New York Times: MERS? It May Have Swallowed Your Loan. By Michael Powell and Gretchen Morgenson, Mar. 5, 2011

Traditional and Roth IRAs are still safe investment options despite reports of limits

Joe Wrobel says: "IRAs are still a safe option."
Joe Wrobel says: "IRAs are still a safe option."

When we consider options for investing some of our income for the future, many of us look to traditional and Roth IRAs. Both offer protection against creditors but there are limits, of course. If you are new to investing, a traditional IRA (Individual Retirement Account) is a tax-deductible investment providing tax-deferred savings. If for example, you earned $50,000 and you paid $2,000 into an IRA, you will only pay income tax on $48,000 of income. So long as you do not withdraw any of the IRA funds until you are 59 ½ years old, you will not pay any tax penalties for early withdrawal, and you will only pay income tax on the money at your then tax rate. A Roth IRA acts differently and your savings are tax-exempt, not deferred. Following the first example, despite your $2,000 contribution to the Roth IRA, will pay income tax on $50,000. However, when you are 59 ½ years old and your Roth IRA has been open for at least five taxable years, you can withdraw the money without being taxed at all.

The reason many people like using IRAs to save for the future is the “don’t touch it or you’ll regret it” factor. Of course, there are times people take loans against their IRA and that is certainly an option if the event arises. What many people don’t think about when they sign up for an IRA is that they are largely untouchable in bankruptcies and there is little a creditor can do to seize those funds.

The 2005 bankruptcy code overhaul added protections making IRAs safer and more creditor-proof. The limit of safe funds is $1,245,457[i]. In addition, self-employed IRAs and workplace 401(K) amounts rolled over into IRAs are not subject to the $1.2M limit to protect against creditors.

Chicago Bankruptcy Attorney Joseph Wrobel offers his comments on IRAs and bankruptcy:

“For almost every single consumer that files a bankruptcy, hard-earned money sitting in a retirement fund [401(k), pension plan, IRA, etc.] is exempt and will not be taken by a Chapter 7 Trustee, nor does not it need to be evaluated as an asset in a Chapter 13[ii].  The Federal Bankruptcy Code and the state statutes that provide for retirement money to be exempt set forth standards that the retirement fund must meet in order for the fund to qualify as exempt. However, it is a truly rare event for a prospective debtor to find him or herself in a situation where his or her retirement money is not exempt.” Attorney Joseph Wrobel.

Commenting on the Chicago Tribune article that notes exceptions to IRA safeguards, he further states, “As with all rules, there are exceptions and that is the gist of this article. One of the exceptions deals with the monetary limit for a Roth IRA. The likelihood that someone with such a large Roth IRA can even qualify for a Chapter 7 is quite small. Generally, with such a large IRA, that person will also have a large income and other assets that would prevent the filing of a Chapter 7.” Attorney Joseph Wrobel.

Are there other exceptions to the bulletproof IRA? Yes, and many are unusual.

The Chicago Tribune article also reported a Wisconsin case involving inheritance, which Attorney Joseph Wrobel points out, “The other exception being an inherited IRA, again, a quite unusual situation.” In Chicago, this past April, the 7th U.S. Circuit Court of Appeals, “essentially said an inherited IRA ceases to become retirement money when it passes to an heir, and the money is available to creditors[iii].

The value of working with a veteran bankruptcy attorney comes from the amount of experiences that attorney has endured and the strange fact patterns that could trigger a variety of events. If you are a consumer considering bankruptcy and you have cash or invested assets, in an IRA, for example, do not worry about losing it. But make certain you hire an experienced bankruptcy attorney.

If you want to learn more about bankruptcy proceedings, contact an attorney at Joseph Wrobel, Ltd. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.


[i] Chicago Tribune: Roth IRAs not always protected from creditors. By Janet Kidd Steward, Sept. 20, 2013

[ii] One of the factors that determine the amount of a Chapter 13 payment plan is the value of the Debtor’s assets.

[iii] See Chicago Tribune article cited above.