Taylor Kosla: Welcome to the Mike Agruss Law Video Podcast. We are a different kind of law firm because we see you as a person and not just a client, and that makes us better at what we do. You’re not just lawyers and you’re not just a client. This is a show about legal topics that friends, neighbors, and family want to know. I am Taylor Kosla, an attorney at Mike Agruss Law, and today we’re talking about filing for bankruptcy with Illinois bankruptcy attorney John Wonais. John is managing partner of Wonais Law. John grew up in the Chicago suburbs and has extensive experience in a variety of areas of law, including bankruptcy. John, how are you?
John Wonais: I’m good. How are you, Taylor?
Taylor Kosla: Good. You recently started your own firm. Tell me what you do at Wonais Law.
John Wonais: Yeah. So at Wonais Law, we help good people get through bad times. Like your firm, we put people first, and what we do is we file bankruptcy, consumer bankruptcy, for our clients and help them eliminate their debt. And my prior firm I work at, which was one of the largest bankruptcy firms in Chicago, I found that a lot of clients were frustrated with how their cases were handled, how many attorneys they were dealing with. So when I started my firm, I decided that when someone comes in to file bankruptcy, they’re only going to be dealing with one attorney throughout the whole process, from beginning to end. And I found that, that is much more efficient when dealing with a bankruptcy case and I’m available for my clients 24/7. So that was the goal in mind when I started my firm and how I’m going to be helping people throughout the bankruptcy process.
Taylor Kosla: That’s great. Let’s start off with the basics. What is the difference between a Chapter 7 and Chapter 13 bankruptcy?
John Wonais: So a Chapter 13 is what’s called a reorganization chapter, whereas a Chapter 7 is a liquidation chapter. A Chapter 13 is a three to five year process where you’re making monthly installment payments to pay back your creditors. In a Chapter 7 case, you’re not repaying your creditors. Instead, if you have a large asset such as a house that is unencumbered, there’s no mortgage, you own it free and clear, the trustee in the 7 case can go and take that asset, take that house and sell it, liquidate it, and use the proceeds to pay back creditors. So really the main difference is one chapter, Chapter 13, you keep your assets, all the assets you want to keep, you get to keep them, but you have to pay back that debt. Whereas the other chapter, you’re not repaying any creditors back. Instead, assets are getting sold by the trustee, if they’re not exempt, to be pay back creditors.
Taylor Kosla: When should a consumer consider filing for bankruptcy?
John Wonais: There are a host of reasons why someone may want to consider filing bankruptcy. If someone’s credit card is maxed out and they’re only paying the minimums, they might want to consider exploring bankruptcy as an option to eliminate their credit card debt. If someone’s house is being foreclosed on and they want to keep their house, an option is to file bankruptcy, and like I said, a Chapter 13 would help them keep their house. Same thing with a vehicle. A lot of people, especially now with COVID, aren’t able to make their payments on cars. So if a creditor comes and repossess your car and you file bankruptcy within so many days, you can keep your car and get your car back. A lot of people will need their cars for work to maintain a living so it’s vitally important that people get their cars back. Another issue is if a creditor sues you and they start garnishing your wages. If you file bankruptcy, that puts an automatic stay on that. So it automatically stops that process. They cannot garnish you right after you file the case. Instead, that creditor is going to have to go into bankruptcy court and seek payments inside the bankruptcy case. So those are really the main reasons. And especially in Chicago, I also see a lot of issues with parking tickets and red light tickets and the City of Chicago and the State of Illinois suspending licenses for these people. And when you don’t have a license, you’re unable to drive and, again, people need to drive to work. So I also found that, that is a huge issue, especially in our area of why people come in and file bankruptcy.
Taylor Kosla: Is it your experience that a lot of your clients are also harassed by debt collectors prior to filing for bankruptcy?
John Wonais: Absolutely, absolutely. That’s obviously another reason, is getting those harassing calls from creditors non-stop. It can really take a toll on people emotionally, and bankruptcy would stop that immediately once you file.
Taylor Kosla: As you know, a large part of our consumer practice is to help consumers who are harassed by debt collectors. Debt collectors often make empty threats to take legal action against the consumer, threaten to garnish wages, and contact family members and friends to embarrass and harass the consumer. In addition to putting an end to harassment by debt collectors, how does filing for bankruptcy benefit a consumer?
John Wonais: Well, like I said, filing a bankruptcy puts a stop to all that. If someone files a bankruptcy case and they get a harassing call after the case is filed, that’s illegal. You can go into the bankruptcy court, tell the judge what’s going on, and the judge will sanction that creditor. And depending on which judge you get, they will sanction these creditors very hard and will actually award punitive damages to the actual debtor, which the creditor would have to pay them. So that’s the main way bankruptcy would help with stopping all those harassing calls and stuff.Taylor Kosla: How has COVID-19 impacted your practice and filing for bankruptcy in general?
John Wonais: Well, now we’re doing everything virtual. I will meet clients in the office if they prefer that, but I can also meet with clients virtually over Zoom or over the phone to file a case. Bankruptcy filings altogether are down in the district, because right now, with all the executive orders, creditors aren’t able to pursue their debt against debtors. So if you haven’t been paying your mortgage since COVID started, mortgage companies can’t foreclose on your property right now. But what’s going to happen is, once all this is over with, debtors are going to own these mortgage companies so much money that they’re not going to be able to pay it and these banks are going to go straight into court and try and foreclose on their house. Same thing with vehicles. A lot of creditors aren’t repossessing vehicles right now. So, because no one’s really going after people right now for debt, people don’t feel inclined to come in and file bankruptcy to stop it. But, unfortunately, what I foresee happening is that bankruptcy filings that are going to dramatically increase because once these executive orders are lifted, they’re not going to have a way to pay back this debt, especially with a lot of people losing their job due to COVID and not having any money at all. I hope the situation gets better for everybody and I hope people start finding jobs immediately once this is over with, but I’m just worried that a lot of people are going to be facing a lot of financial hardship.
Taylor Kosla: COVID-19 has really changed the landscape for a lot of different areas of law. Do you expect bankruptcy to return to being an in person type of practice and meeting more with their clients in person? Or do you see it continuing to be remote?
John Wonais: I personally like to meet with clients in person. To file bankruptcy, there are so many documents you have to review with the client, so many documents they have to sign. Doing it virtually, I fear that a lot of clients wouldn’t necessarily read everything and it’d be hard for me to go through page by page and explain everything to them virtually. So I do foresee a going back to how it was before COVID where people are coming into the office, but I also foresee people not wanting to come to the office and also still wanting to do virtually. So I do think people would come back to the office.
Taylor Kosla: How much does it cost for a consumer to file bankruptcy?
John Wonais: So it really depends. Chapter 13 and Chapter 7, how the fees are structured are way different. For a Chapter 7, what our firm does is we’ll file a case for no money down if you’re a qualified earner, and then the remaining fees, you will pay us in installments over six months to eight months to 10 months. I’m very flexible with how my fees will get paid back later. For a Chapter 13 case, how it works is the client comes in, pays a down payment, and then the remainder of the fees will get paid in monthly installments when they’re paying on their bankruptcy payments. So, like I said, in a Chapter 13 case, you’re paying monthly installment payments for three to five years. And let’s say your payments are $100 a month, every month for three to five years, a portion of that goes towards my attorney fees. And it all goes through a third party trustee. So it’s not like a client would pay me directly after a Chapter 13 case like they would in a Chapter 7 case. The trustee handles all that. They’re the ones who collect the money every month and disperse that money to creditors and attorneys.
Taylor Kosla: So it seems like you make filing for bankruptcy accessible to most people in a position to file.
John Wonais: I do, and the reason for that is, people filing bankruptcy don’t have money, most people at least, and that’s why they’re coming in to file bankruptcy. A lot of times, let’s say someone comes in with $1000 in their bank account and they have rent due in 10 days, I’m not going to make that person pay me $500 and then not be able to pay rent the next month. I’m more concerned about my client being able to stay in their house, stay in their apartment than pay my attorney fees up front. And that’s why I structured it like that, where they can pay me later in a Chapter 7 case and I’ll be very flexible in how much they can afford to pay me back every single month after that.
Taylor Kosla: Great. We’ve worked on cases together where your client has had issues with their credit report as a result of the bankruptcy. We’ll get into that in a little bit. Can you explain how filing for bankruptcy can help consumers rebuild their credit?
John Wonais: Absolutely. So when you initially file bankruptcy, it’s going to be on your record, on your credit report. What I have seen is that your credit score will either take a little dip or be in limbo for about a year. But once you’re out of bankruptcy, you’re going to eliminate or discharge most of your debt, if not all of your debt. So what happens is, you’ll get an increase in your credit score after that because you no longer have that debt. And what I tell my clients all the time is, “You’re filing bankruptcy today. Do not get any more debt after you file the case, because if you get more debt after you file the case, we cannot discharge that debt in the case you just filed.” I also suggest to my clients to get a secured credit card after filing and only charge whatever you can afford to pay every month on that credit card so that you’re not behind and you’re not maxing it out. So that’s what I’ve seen in terms of your credit score and how it helps. It is a process, but the credit score will increase once the process is over with.
Taylor Kosla: Okay. And we’ve worked on cases together post-bankruptcy petition, or post-bankruptcy discharge where your client comes to you and says, “There’s an issue with my credit report.” Maybe this account is saying it was discharged and it wasn’t. Can you tell me a little bit about these issues that you see most common with your clients?
John Wonais: I see tons of issues all the time with credit reports. Clients coming in will say, “This is someone I don’t even owe money to on my credit report,” or, “This amount is inaccurate on my credit report.” Post-bankruptcy, I see all the time that these credit bureaus take forever to actually discharge the debt on their credit report, eliminate it on their credit report, mark it correctly, categorize it correctly on their credit report. I’m sure you’ll elaborate a lot on this, because you’ve handled some of my clients and helped them in the past. So what exactly have you seen?
Taylor Kosla: What I’ve seen is a consumer has an account on his or her credit report that shows it was discharged in bankruptcy when it was not, or vice versa. Maybe an account is reporting a balance after it was discharged. My firm helps consumers under the Fair Credit Reporting Act, which is a federal law that protects people’s information in their credit file. There’s a process to dispute the inaccurate information, which will trigger the three credit bureaus, Experian, TransUnion, and Equifax to conduct an investigation to determine whether that information is inaccurate. If the credit reporting agencies determine that the information is accurate when it is not. That’s when we come in and file a Fair Credit Reporting Act lawsuits.
John Wonais: And how does that typically work? Is it a statutory amount that they have to pay the debtor?
Taylor Kosla: So under the Fair Credit Reporting Act, there is what’s called a Fee Shift Provision, which means the clients do not have to pay my firm’s fees directly. In addition to attorney’s fees and costs that are recoverable, a consumer is entitled to statutory damages between zero and $1,000 in actual damages. For example, actual damages would be this inaccurate reporting caused a client to be declined credit, or maybe they had a higher interest rate on a loan. Those are actual damages where you can put a true figure to the loss that they’ve incurred as a result of the inaccurate reporting. Back to bankruptcy, from start to finish, how long does it take for a consumer to complete the bankruptcy process?
John Wonais: So a Chapter 13, it’s a minimum of three years, a maximum of five years for Chapter 13 case. There was a small caveat with that. Sometimes you can actually end the case earlier than three years, but that depends on if the claims that come in from creditors are so low that you paid it back before the three year period is up. So people can actually end their case earlier than three years, but statutorily, it’s a three to five year process. Chapter 7 is much shorter. It’s a four to six month process because, again, you’re not repaying creditors every month. So, essentially, the process is, you come in and file a Chapter 7 case, then you’d have one meeting with the trustee, and the trustee is going to assess whether or not you do have a lot of assets or don’t have a lot of assets. Nine times out of 10, even higher than that, my clients don’t have assets. So what they get is a no asset report and then the judge issues a discharge of their debt.
Taylor Kosla: Okay. Onto the fun stuff. Let’s do some rapid fire questions.
John Wonais: All right.
Taylor Kosla: What is your favorite food?
John Wonais: I’d have to say deep dish pizza.
Taylor Kosla: Do you have a particular type of deep dish that you prefer?
John Wonais: I like Giorando’s.
Taylor Kosla: Good choice. What is your favorite animal?
John Wonais: Two years ago, I would have said a tiger, but we recently got a Shiba Inu, so I I’d have to go with the dog.
Taylor Kosla: Good answer. If you could teach one subject in school, what would it be?
John Wonais: Bankruptcy law.
Taylor Kosla: You had to say that, right? What do you like to do most on the weekends?
John Wonais: Relax. I recently picked up golf. So when it gets nicer out, go golfing.
Taylor Kosla: Yeah, we’ll have to play together sometime.
John Wonais: Absolutely. You’ll probably beat me.
Taylor Kosla: We’ll see about that. John, what’s the best way for people to get in touch with you?
John Wonais: People can go to my website. It’s chicagodebtpros.com, or wonaislaw.com. Or just give me a call. My number is 312-883-5422.
Taylor Kosla: John, thank you so much for joining me today. Make sure to tune into our next episode.
John Wonais: Absolutely. Thanks for having me.
