Tag: bankruptcy

Will a Chapter 7 or 13 Bankruptcy Close The Book On Your Professional License?

Posted on by Louis Fine

Bankruptcy happens. It’s not a crime, it’s not a moral failure, it’s not a character flaw. In times of economic upheaval, in particular, even the most hard-working, intelligent, and responsible professionals, from physicians to accountants to hairstylists, can find that their debts have simply become untenable. Filing for bankruptcy can itself be a difficult experience, emotionally, financially, and practically. But if you’re also worried that you might lose your professional license, and thus your ability to support yourself and your family, the anxiety is only compounded.

Fortunately, in most cases, filing a Chapter 7 or 13 bankruptcy proceeding without more will not result in the loss of a professional license.

The Bankruptcy Code Is Designed To Provide Protection, Not Persecution

The law provides for bankruptcy proceedings to give an overwhelmed debtor a second chance and give creditors a chance at recovering at least some of the amounts owed to them. Bankruptcy proceedings may be painful, but they are not supposed to be a persecution.

That is why the Bankruptcy Code prohibits private and public employers from using a bankruptcy filing as the sole reason to terminate an employee or otherwise take adverse action against them.

Specifically, Section 525(b) of the Bankruptcy Code provides that “No private employer may terminate the employment of, or discriminate with respect to employment against” an employee “solely because” the employee:   

  • is or has been a debtor or bankrupt under the Bankruptcy Act;
  • has been insolvent before the commencement of a bankruptcy proceeding or during the case but before the grant or denial of a discharge; or
  • has not paid a debt that is dischargeable or that was discharged under the Bankruptcy Act.

Note the “solely because” language. If other reasons exist for terminating an employee that may tangentially relate to the bankruptcy, such as dishonesty, fraud, or other malfeasance, the Bankruptcy Code won’t necessarily save an employee’s job.

Professional Licenses Are Protected Assets In Bankruptcy

A professional license is a valuable asset, one obtained through a substantial investment of time, effort, and money. In a bankruptcy proceeding under either Chapter 7 or 13, the debtor’s assets become a crucial part of resolving the debts and obligations that led to the filing of bankruptcy in the first place.

But professional licenses are only of value to the licensee; they can’t be transferred or used by a debtor to satisfy their debt. The real threat that bankruptcy poses to a professional license is the risk that a governmental licensing body, like the Illinois Department of Financial and Professional Regulation (IDFPR), will use the proceedings as a basis for denying, suspending, or revoking a license.

But since bankruptcy, as noted, is not designed for punishment, the Bankruptcy Code explicitly protects professional licenses and the ability of licensees to continue to earn a living.

Specifically, Bankruptcy Code Section 525(a) states:

[A] governmental unit may not deny, revoke, suspend, or refuse to renew a license… against a person that is or has been a… debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

Again, the “solely because” language is key. A professional licensee’s bankruptcy, depending on the circumstances, may implicate other issues that could lead to or support disciplinary actions. But the bankruptcy itself, without more, should not threaten a debtor’s professional license.

Louis Fine: Chicago Professional License Defense Attorney

If you are a licensed Illinois professional and have concerns about how a bankruptcy might impact your license and career, I welcome the opportunity to meet with you.

Please give me a call at (312) 236-2433 or fill out my online form to arrange for your free initial consultation. I look forward to meeting with you.

Please Make It Stop: How Bankruptcy’s Automatic Stay Can Keep (Most) Debt Collectors at Bay

Posted on by Louis Fine

If you are overwhelmed by debt that you simply can’t keep up with, your creditors and debt collectors won’t let you forget it. The calls, the letters, the harassment and constant threats of garnishments, lawsuits, foreclosures, or evictions become a constant presence in your life. You just want it to stop.

The filing of a bankruptcy petition can do that. It marks the end, at least temporarily, of the almost daily reminders of the dire consequences of your current financial situation.

When a bankruptcy petition is filed, an “automatic stay” goes into effect at that very moment. The automatic stay applies to a broad classification of actions against a debtor and is in effect a “time-out” that can allow you, your attorney, the court, and creditors to develop the plans to move forward.

What the Automatic Stay Stops

Under the Bankruptcy Code, most creditors are forbidden at that point from committing any act that constitutes an attempt to collect on a debt. This includes:

  • phone calls and letters from debt collectors and creditor;
  • foreclosures;
  • repossessions and seizures of property;
  • set-offs of funds;
  • perfection of liens;
  • garnishments;
  • civil collection lawsuits.

Exceptions to the Stay

Not all creditors are barred by an automatic stay from continuing in their efforts to collect amounts owed from the debtor. For example, these will not be stopped:

  • certain tax proceedings
  • actions for collecting for past-due child-support
  • actions for collecting criminal penalties
  • eviction proceedings if the landlord has already obtained a judgment for occupancy of the premises prior to a tenant’s bankruptcy filing.

Otherwise, every creditor that you owe money to is barred from trying to collect it while the automatic stay is in place.

Lifting the Stay

Once the automatic stay is in place, creditors who are now thwarted in their efforts to collect from you can ask the bankruptcy court to lift the stay for their particular debt, allowing them to proceed with their efforts to secure payment.  You and your lawyers will receive notice of a creditor’s request to lift the stay and have an opportunity to oppose the request.

As with all aspects of bankruptcy law, the rules regarding how and when the automatic stay is applied and how it may be lifted will to a very large degree depend on the specifics of your situation. You should always consult with an experienced bankruptcy lawyer to determine whether filing for bankruptcy and availing yourself of the powerful tool that is the automatic stay is the right course of action for you.

The Law Offices of Louis R. Fine

If you are facing a mountain of debt that you can’t pay, I can help. I assist clients facing extreme financial challenges and put them on a path to a fresh start and a brighter future. When you meet with me, we will examine your financial situation, discuss your options and determine the most appropriate course of action. Please give me a call at (312) 236-2433 or fill out my online form for a free initial consultation.