County worker learns honesty is best policy in bankruptcy court

For those struggling with personal debt, filing a Chapter 7 bankruptcy for individuals may be a helpful solution that can provide a fresh financial start.

Recently, it was reported that a top aide to an Illinois county clerk could face trouble for failing to disclose in her personal bankruptcy proceedings that she earns a six-figure paycheck from Cook County. A month following her filing for Chapter 7 bankruptcy, the woman failed to disclose that she had secured the position with the county with a salary of $104,000 a year. When filing for Chapter 7 bankruptcy, she was required to provide an accurate picture of her personal finances. During an August creditors’ hearing, she answered ‘yes’ under oath in response to questions concerning whether or not she had reviewed all statements and financial schedules included in her filing. She also answered affirmatively when questioned if all the information in her filing was true and correct. The woman was ultimately granted a Chapter 7 discharge. In the original filing, she claimed $5,397 in monthly income and $5,744 in monthly expenses; she further claimed $563,915 in assets and $496,841 in liabilities. Some argue that had she properly disclosed her income, she would have been ineligible for Chapter 7 bankruptcy, and would have had to file Chapter 13 bankruptcy.

In a Chapter 7 bankruptcy, a discharge from the court releases the filing party from certain debts and prevents creditors from further pursuing them. This can provide those struggling with debt with important debt relief. A Chapter 7 debt discharge is, however, subject to exceptions. In general, aside from those that are dismissed or converted to a Chapter 13 bankruptcy, 99% of Chapter 7 bankruptcies are discharged. A discharge will typically be granted within 60 to 90 days from the first creditors’ meeting; this is true in most cases unless a party in interest files an objection or a request to extend the period to object.

However, a discharge can be denied in cases when the court finds that the filing party failed to keep or produce adequate financial records, failed to adequately explain a loss of assets, committed a bankruptcy crime such as perjury, failed to follow a legal order of the bankruptcy court, failed to complete a financial management class approved by the court or by fraud, transferred, concealed, or destroyed property that would have been property of the estate. Filing parties may need to reaffirm certain debts if they wish to keep the property, such as a car, and some items are not subject to debt discharge. A Chapter 7 discharge can be revoked at the request of a creditor or trustee under some circumstances, including fraud by the party filing.

Overwhelming debt and financial challenges can be stressful but bankruptcy options exist to help reduce that stress. As long as the party whom is filing is honest with the court, bankruptcy can be a helpful solution.

Source: Chicago Sun-Times, “County aide didn’t disclose government job in personal bankruptcy case,” Dane Placko, et al., Dec. 13, 2012

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County worker learns honesty is best policy in bankruptcy court