FAQs

CHAPTER 13 BANKRUPTCY IS AVAILABLE TO INDIVIDUALS WITH A REGULAR SOURCE OF INCOME

The filing of a Chapter 13 Bankruptcy is available to an individual with a regular source of income. The Bankruptcy Code defines regular source of income, as “income that is sufficiently stable to enable such individual to make payments under a plan under Chapter 13”. Most people who file Chapter 13 do so to prevent a sheriff sale and to reorganize their mortgage debt, to pay delinquent taxes or simply because they are not eligible to file a Chapter 7 Bankruptcy for some reason.

CHAPTER 13 BANKRUPTCY CAN BE USED TO CONTINUE OPERATING A BUSINESS AND REORGANIZE ITS’ DEBTS

Section 1304 of the Bankruptcy Code defines a debtor engaged in business as “a debtor that is self-employed and incurs trade credit in the production of income from such employment is engaged in business”. For instance, if a person owns their own business as a sole proprietor, then any business debts on which they have personal liability can be included in their Chapter 13 Bankruptcy. Similarly, if a person is a partner, the partnership’s assets would not become property of the bankruptcy estate, but only the individual debtor’s interest in the partnership. Likewise, the individual’s liability for their portion of partnership debts would be considered in the bankruptcy. The debtor has to file the case in their name, not in the name of the business, as a business entity cannot file for Chapter 13 Bankruptcy. Corporations, partnerships, limited liability companies (LLC) and other non-individual entities are not eligible to file Chapter 13. If you want to file a bankruptcy with respect to those particular entities, then a business Chapter 11 bankruptcy is required. However, it should be noted that an individual is also eligible to file under Chapter 11. Generally, it is more preferable though to file under Chapter 13. The reason is that more extraordinary costs are often incurred under a Chapter 11, such as increased attorney fees, quarterly U.S. Trustee fees and the possible compensation of committee’s counsel. Also, the petition filing fee in a Chapter 11 Bankruptcy is $1,717.00, whereas the petition filing fee in a Chapter 13 Bankruptcy is only $310.00. A Chapter 13 is simpler and just less time-consuming that a Chapter 11.

DEBT LIMITATIONS DETERMINE ELIGIBILITY TO FILE A CHAPTER 13 BANKRUPTCY

The Bankruptcy Code does restrict an individual’s ability to file under Chapter 13. Oftentimes self-employed debtors have many financial obligations and may not be eligible to file a Chapter 13 Bankruptcy. The debt limitations are non-contingent and liquidated debts that existed on the date of the bankruptcy filing that are no more than $1,184,200.00 in secured debts and $394,725 in unsecured debts. Situations may arise where your property is secured by debts that total more than the allowed amount, but the property is actually worth less than that allowed amount. The courts have utilized a valuation test and have taken the position that the value of the security determines the qualifications to file a Chapter 13. To the extent there remains an unsecured portion after applying the valuation test, then that unsecured portion is to be considered amount the unsecured debts in arriving at the debtor’s qualification to file a Chapter 13.

THE “MEANS TEST” ALSO APPLIES TO A CHAPTER 13 BUSINESS DEBTOR

A debtor is required to file a statement of current monthly income aka the means test upon filing a Chapter 13 Bankruptcy. This looks at all income the debtor has received for the past six months prior to the month of the filing of the petition. The means test applies to an individual debtor filing a personal Chapter 13 Bankruptcy, as well as an individual filing a business Chapter 13 Bankruptcy. The current monthly income or disposal income for a business is calculated on the basis of gross income minus expenses that are necessary for the “continuation, preservation and operation of such business”. The means test will then determine how long the applicable commitment period is. Other words, how long does one have to continue in Chapter 13. The commitment period for most debtors engaged in business is normally 60 months. An exception to the filing of such a statement would be the filing of a Chapter 7 Bankruptcy where the majority of the debtor’s debts are business related. Chapter 7 only requires the filing of a statement where the debtor’s debts are primarily consumer debts.

CHAPTER 13 DEBTOR ENGAGED IN BUSINESS REQUIRED TO SUBMIT CERTAIN DOCUMENTATION

A Chapter 13 trustee oversees all Chapter 13s and is required to obtain certain specific information from the debtor. If the debtor is engaged in business, then the trustee is required to elicit additional information, such as “investigate the acts, conduct, assets, liabilities and financial condition of the debtor, the operation of the debtor’s business and the desirability of the continuance of such business, and any other matter relevant to the case or the formulation of a plan”. In order to better assist the trustee, a self-employed person or debtor engaged in business must complete a business questionnaire, with attachments of various types of financial information. It is also necessary to submit monthly operating reports showing the ongoing operation of the business.

A CHAPTER 13 DEBTOR MAY UTILIZE CASH COLLATERAL, BUT ONLY UPON APPROVAL

In order for a debtor to continue operating his or her business, it is oftentimes necessary to obtain funds to meet everyday business expenses. The normal source of those funds would be to use cash collateral. The Bankruptcy Code defines cash collateral as “cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents, whenever acquired, in which both the estate and an entity other than the estate have an interest”. Therefore, it is necessary for the debtor to take certain first steps upon filing a Chapter 13 Bankruptcy. Section 363(c)(2) and 363(c)(4) prevents the use of cash collateral without obtaining the consent of the creditor who holds a security interest in such collateral or to obtain the approval from the Bankruptcy Court. Also, if any security agreement so provides, cash collateral may also include any existing proceeds or after acquired. A Chapter 13 business debtor is considered to be a fiduciary of any cash collateral and therefore is required to segregate or set aside an account for such collateral.

One type of debt that many people are faced with are criminal fines. This category can include fines, fees, surcharges or any other costs assessed by the courts, various administrative agencies or other entities. It is important to determine just what type of debt you are faced with:

1) Fine: (this type of debt is normally imposed by a court as a penalty for committing an infraction, misdemeanor or felony); or

2) Fees: (this type of debt is an administrative fee, such as a user fee that is designed to recoup the costs of various types of actions, such as prosecution, incarceration, supervision of criminal defendants or other actions); or

3) Surcharges: (this type of debt is usually a flat fee or percentage that is added to a fine to fund a particular government program); or

4) Interest, collection costs, payment plan costs and penalties: (these are additional costs, such as interest, collection costs and late fees that may be assessed as part of your fine, fees or surcharges due to delinquent or late payments); or

5) Restitution: (this type of debt is imposed by the court to reimburse the victim for the damage he or she has suffered by the actions of the defendant).

These types of debts cannot simply be ignored in hopes that they will go away. Non-payment of these debts can have serious consequences. Filing bankruptcy can be an orderly way of dealing with these debts. The type of bankruptcy you file will often determine whether you can readjust or even eliminate the particular debt.

Fines are generally not dischargeable in a Chapter 7 Bankruptcy. The particular section of the Bankruptcy Code states that a debt is not discharged to the “extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss”. It is important to point out that to be nondischargeable the debt must be owed to a governmental unit. Also, if the debt is of a punitive nature, then the exception to non-dischargeability does not apply. A Chapter 13 Bankruptcy

Many penalties and fines are dischargeable in a Chapter 13 Bankruptcy.

RETIREMENT FUNDS THAT HAVE RECEIVED A FAVORABLE DETERMINATION UNDER THE INTERNAL REVENUE CODE CAN BE EXEMPTED IN THE BANKRUPTCY CASE

Retirement funds are protected to the extenxt that those funds are in an account that has received a favorable determination under the Internal Revenue Code. Such determination is that the funds are basically exempt from taxation. Retirement funds are either excluded from the bankruptcy estate or can be exempted under most state exemptions or the federal exemptions. The types of retirement funds that are referrred to under the Internal Revenue Code are as follows:

IRC $401-a qualified (ie. tax-deferred) pension, profitsharing and stock bonus plan created under a trust established by an employer for the exclusive benefit of employees or beneficiaries.

IRC $403-qualified (ie. tax-deferred) annunity plans that are established by an employer for an employee under IRC $404(a)(2) or $501(c)(3).

IRC $408-individual retirement accounts (IRA), which is “a trust created or organized for the exclusive benefit of an individual or his beneficiaries.”

IRC $408A-a Roth IRA.

IRS $414-other retirement plans for controlled groups of employees, including predecessor employers, partnerships or proprietorships, governments and churches.

IRS $457-eligible deferred compensation plans established and maintained by eligible employers.

IRS $501(a)-retirement plans established and maintained by defined tax-exempt organizations.

RETIREMENT FUNDS THAT HAVE NOT RECEIVED A FAVORABLE DETERMINATION UNDER THE INTERNAL REVENUE CODE CAN POSSIBLY STILL BE EXEMPTED IN THE BANKRUPTCY CASE 

There are particular instances where the funds in a retirement fund have not received a favorable determination under the Internal Revenue Code, but those funds can still be exempted and protected if the debtor can show:

1) no prior or unfavorable determination has been made by a court or the Internal Revenue Service; and

2) the retirement fund in question is in substantial compliance with requirments of the Internal Revenue Code; or

3) the retirement fund in question is not in substantial compliance with the requirments of the Internal Revenue Code and the debtor is not responsible or the cause of the failure of the Internal Revenue Code to be in compliance.

DIRECT AND INDIRECT TRANSFERS FROM ONE ACCOUNT TO ANOTHER CAN BE EXEMPTED

As long as the retirement fund or account is a qualified account under any of the Internal Revenue Code section’s referenced above and is exempt from taxation, then any direct transfer of funds from one account to another shall continue its’ protected status and be exempt under the Bankruptcy Code. For instance, any distribution that is in the nature of a rollover distribution and such distribution is deposited into the new fund or account within 60 days after the direct transfer of the funds continue to be exempt. It is necessary that both funds be qualified funds when making a transfer. Otherwords, the funds must be transfered from a fund or account that is qualifed into a fund or account that is also qualified, without the funds ever coming into contact with the debtor. However, indirect transfers or rollovers are permitted as well. An example would be where the debtor closed out one qualified account and received those funds, then within 60 days opened up a new qualified account and deposited the funds.

EVEN IF AN ACCOUNT IS NOT TREATED UNDER THE INTERNAL REVENUE CODE, IT MAY STILL BE EXEMPT

A troubling situation that arises on occasion is where a person has a retirement account that is not treated under the Internal Revenue Code within the context of this particular exemption. Many federal employees have a retirement vehicle known as a thrift savings plan, which is not treated under the Internal Revenue Code, but rather Title 5 of the United States Code. The question then becomes whether such funds are exempt under the Bankruptcy Code? The bankruptcy courts have treated such funds as exempt. Such plans are exempt from taxation under a different section of the Internal Revenue Code, so the courts have concluded that such plans were intended to be exempt in bankruptcy as well.

RETIREMENT FUNDS ARE ALWAYS PROTECTED REGARDLESS OF THE CHOICE OF EXEMPTION

In Pennsylvania, retirement funds are exempt under either the state exemptions or the federal exemptions. However, if a person was ever faced with a situation where their particular state did not allow them to take the federal exemptions and the particular state exemptions did not allow for the exemption of retirement funds, then those funds can still be exempted under the Bankruptcy Code, as a different section of the Bankruptcy Code was created to address such a situation.

INHERITED IRA’S ARE NOT CONSIDERED RETIREMENT FUNDS FOR PURPOSES OF EXEMPTIONS

Sometimes a situation that person may be faced with prior to filing bankruptcy is that they inherited an IRA. The question is whether an inherited IRA can be exempted? Very few courts have addressed this issue, but those courts have concluded that such an IRA is not exempt or protected from creditors. An inherited IRA is not viewed as your typical retirement, and is not exempt from taxation under the Internal Revenue Code. 

RETIREMENT LOANS SURVIVE ANY BANKRUPTCY FILING

One of the key benefits of a bankruptcy is the imposition of the automatic stay. The automatic stay is what prevents a creditor from being able to collect against you. In order to proceed with any collection activities against the debtor, it is first necessary to obtain relief from stay or permission from the court. However, the Bankruptcy Code provides certain exceptions to the automatic stay whereby relief from stay is automatically granted and therefore it is not necessary to obtain the court’s permission. One of the exceptions to the automatic stay is the withholding of income from the debtor’s wages that is used solely for the repayment of a loan that was taken out against a retirement plan treated under the Internal Revenue Code or a thrift savings plan treated under Title 5 of the United States Code. The Bankruptcy Code provides for the exception from the automatic stay for the collection of payments toward any loans taken out from a pension, profit-sharing, stock bonus, or other qualified plan under the Internal Revenue Code, likewise such loans have been granted an exception to discharge and survive any bankruptcy. Otherwords, the debtor will continue to remain responsible for those loans.

EXEMPTING THE DEBTOR’S RIGHT TO RECEIVE PAYMENT UNDER A RETIREMENT PLAN

Once a person finally retires and starts receiving payments from their retirement account, it is then necessary to exempt those funds under a different section of the Bankruptcy Code. Section 522(d)(10)(E) of the Bankruptcy Code may used by debtors only in those states that have not opted out of the federal bankruptcy exemptions. Pennsylvania is one of those states that has not opted out and you may use this exemption. In order to qualify under this exemption, the retirement plan must be a stock bonus, pension, profitsharing, annuity or similar plan or contract. Also, such payments must be on account of illness, disability, death, age or length of service to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. However, the plan must not have been established by or under the auspices of an insider that employed the debtor at the time the debtor’s rights under such plan arose and such payments are on account of age or length of service and such plan does not qualify under $401(a), $403(a), $403(b) or $408 of the Internal Revenue Code, which is mentioned above. It should be pointed out that a plan does not have to be tax-qualified in order for the funds to be exempt under Section 522(d)(10)(E). Tax-qualification is only required if the plan was established by or under the auspices of an insider that employed the debtor and payments are on account of age or length of service. For purposes of the Bankruptcy Code, insiders include directors and officers of corporations, general partners of partnerships and persons in control of plan sponsors. In essence, if the debtor is not an insider, the plan may be exempted uner $522 (d)(10)(E) without tax-qualification, but if the debtor is an insider then tax-qualification is required in order to use the exemption.

EXPERIENCE COUNTS WHEN SELECTING AN ATTORNEY

If you are uncertain as to whether your retirement accounts would be protected in your bankruptcy or simply have any other questions, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd today. You may contact him by calling 412-471-9670 or by completing our contact information form. A free consultation will be scheduled at your convenience.

The Bankruptcy Code provides that an individual, who has been a debtor in another bankruptcy case within the past 180 days and that case was dismissed due to either 1) the willful failure of the debtor to abide by court orders or to proceed with the proper prosecution of the case; or 2) to have requested and obtained the dismissal of the case after a creditor has previously filed a request for relief from the automatic stay, then such individual is not eligible to file another bankruptcy case for 180 days.

It is important to note that dismissal under this section of the Bankruptcy Code only pertains to cases that were dismissed within the previous 180 days. Any cases that have been dismissed more than 180 days ago are not effected. Therefore, a person is eligible to file a subsequent bankruptcy case. Also, the previous bankruptcy case must have been dismissed due to the willful misconduct of the debtor or the filing of a voluntary dismissal by the debtor following the filing for releif from the automatic stay by a creditor. If the case was dismissed for any other reason, then a person is not prevented from filing a new bankruptcy case within the next 180 days.

Another point worth noting is that the prohibition on filing applies to bankruptcies filed under any chapter of the Bankruptcy Code. This applies not only to the previous case that was filed, but also to any new case. For instance, a debtor who had a Chapter 7 Bankruptcy dismissed is not eligible to file another bankruptcy under any chapter of the Bankruptcy Code, including another Chapter 7 or a Chapter 13. Likewise, a debtor who had a Chapter 13 Bankruptcy dismissed is not elibible to file another bankruptcy under any chapter of the Bankruptcy Code, including another Chapter 13 or Chapter 7.

One of the reasons for an individual’s ineligibity to file another bankruptcy case is due to the fact that the previous case was dismissed for the willful failure of the debtor to abide by court orders or to proceed with the proper prosecution of the case. Willful misconduct must be something that is more intentional or deliberate rather than something that is simply accidental or beyond the debtor’s control. The courts generally look to the totality of the circumstances of the debtor’s conduct in the prior bankruptcy case. In otherwords, whether the debtor’s actions are a deliberate effort to delay the proceedings to the detriment of the creditors. If the court determines that the debtor was not making an effort to delay the proceedings, then willful misconduct on the part of the debtor in not likely to be found. Willful misconduct not only applies to the willful failure to abide by orders of court, but also the willful failure to appear before the court in the proper prosucution of the case. The court will look to the entire conduct of the debtor in arriving at the decision as to whether such conduct was willful. Normally, the failure to make the monthly Chapter 13 plan payments in a Chapter 13 Bankruptcy or the failure to appear for the meeting of creditors is not enough by itself to make a finding of willful failure to appear before the court. Repeated failures that often appear to serve no other purpose but to delay the proceedings is the type of willful misconduct that will lead to dismissal under this section of the Bankruptcy Code.

Another type of criteria for dismissal under this section is where the debtor requested and obtained the voluntary dismissal of the prior case following the filing a motion for relief from the automatic stay by a creditor. This makes an individual ineligible to file a new case if the prior case was voluntarily dismissed within 180 days of the filing of the new case. The reason behind such prohibition is to prevent an individual from abusing the process and preventing and/or hindering a creditor in seeking its’ legal remedies. It is important to note that this prohibition applies only where the debtor requested and obtained the voluntary dismissal of the prior bankruptcy case after the filing of a motion for relief from the automatic stay. For instance, if a debtor requested the dismissal of the previous case prior to the filing of a motion for relief from stay by a creditor, then the debtor is not ineligible to file a new case within the 180 days, even though the previous case was dismissed after the filing of the motion for relief from the automatic stay. Otherwords, the creditor’s motion for relief from stay must be filed prior to the debtor’s request for dismissal in order for the 180 day bar to apply. This section of the Bankruptcy Code applies only where the debtor had the previous case voluntarily dismissed. Where the request for dismissal was by a creditor or the trustee, then the prohibition on filing for 180 days does not apply.

If a new case is filed and it is subsequently deterimed that it was filed in violation of the 180 day prohibition, then any automatic stay that came into effect upon the filing of the case is void and is not effective in preventing any sheriff sale or other collection efforts to moving forward.

Up to this point, it has been discussed about being prohibited from filing a new case for 180 days. However, the bankruptcy courts have the statutory authority to prohibit serial or repeat filers from filing for periods longer than 180 days.

If you find yourself in a similar situation and are uncertain about how to proceed or simply have other questions about the bankruptcy process, then contact Pittsburgh Bankruptcy Attorney Rodney Shepherd for a free consultation. Please complete the contact information form on our website or call 412 471-9670 and my secretary will immediately schedule you an appointment.

There may be times when a debtor is making payments through a Chapter 13 Plan, then all of a sudden he or she is hit with a particular set of events that makes it almost impossible to complete their Chapter 13 repayment plan. The Bankruptcy Code provides for the filing of a motion seeking a hardship discharge in these type of circumstances. Of course the ability to receive a hardship discharge is not without limitation. The debtor must show the following:

1) The failure to complete your Chapter 13 plan payments are due to circumstances “for which you should not be justly held accountable” (These circumstances do not need to be catastrophic or the “truly worst of the awfuls”, but it is necessary to present evidence more than simply unsubstantiated and conclusory statements of the debtor’s inability to complete the Chapter 13 Plan. A severe deterioration in the debtor’s financial circumstances may possibly be sufficient, whereas a temporary loss of a job would not be);

2) That unsecured creditors have received at least as much as they would have received if the debtor had filed a Chapter 7 Bankruptcy (Oftentimes, a debtor might have to file a Chapter 13 Bankruptcy because they have property that they are unable to exempt. This would mean that it would be necessary to pay unsecured creditors at least the value of the nonexemt property because had the debtor filed a Chapter 7 Bankruptcy this property would have been liquidated and the unsecured crditors would have received at least the value of this property. This being the case, a hardship discharge would more likely be granted near the completion of the Chapter 13 Bankruptcy); and

3) Any modification of the Chapter 13 Plan simply would not be practticable.

A Chapter 13 Bankruptcy is generally anywhere from three to five years. In order to receive a hardship discharge, it is first necessary that the Chapter 13 Plan has been confirmed. The type of discharge that the debtor receives is similar to that received in a Chapter 7 Bankruptcy, whereas the discharge that is received in a Chapter 13 Bankruptcy is somewhat broader. If a hardship discharge is granted only unsecured and nonpriority debts are wiped out. The debtor still remains legally liable for any secured or priority debts. One other point worth noting is that upon the completion of a Chapter 13 Bankruptcy the debtor is required to certify that all domestic support obligations, such as child support, spousal support or alimony have been made. This is not a requirement to receive a hardship discharge. Otherwords, no certification regarding the payment of domestic support obligations is necessary.

So if you find yourself facing similar circumstances or you have any unanswered questions regarding bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form and we will immediately contact you to schedule a free consultation.

UPON FILING BANKRUPTCY, ANY BANK OR FINANCIAL INSTITUTION STILL MAINTAINS ITS COMMON LAW RIGHT OF SET-OFF

Oftentimes a person may have a deposit of money in their checking account at the time that they file bankruptcy. The question that arises is whether those monies are safe?  The Bankruptcy Code provides the bank with what is known as a set-off. A set-off is when a creditor, often a financial institution, retrieves the money from the debtor’s account to pay a debt owed to that creditor by the debtor. The automatic stay that comes about upon the filing of bankruptcy prohibits the set-off of any debt owed by the debtor that arose prior to the commencement of the case in which a claim could be made against the debtor. Generally, creditors may not engage in any type of collection activity to coerce the payment of a prepetition debt. However, an exception to the rule is that a freeze on a debtor’s bank account, by a bank that a debtor owes money to, is not considered a set-off that is prohibited by the automatic stay. The catch is that it must be a temporary freeze. A temporary freeze is permitted to allow the creditor to obtain relief from stay in order to exercise its’ right of set-off. A permanent freeze without seeking relief from stay would clearly be a violation of the provisions of the automatic stay.

THE RIGHT OF SET-OFF MAY STILL BE DEFEATED IN THE CONTEXT OF YOUR BANKRUPTCY

Even though a bank or financial institution might have a right of set-off, there are certain situations in which that right may be limited, or even defeated:

1)  It has clearly been determined that if a debtor has a plan confirmed in their Chapter 13 Bankruptcy and provides for a different treatment of the claim, then any set-off or freeze is prohibited. For instance, a set-off by the IRS would be prohibited after the confirmation of a Chapter 13 plan that has provided for payment of the debt through the plan.

2)  A typical situation situation that alot of debtors find themselves in is: 1) One of their debts is from a credit card issued by a bank that they have deposits with. The bank is prohibited from setting off funds that the debtor may have deposited with the bank, or 2) A debtor may have a consumer line of credit with the bank. Likewise, the bank is prohibited from placing any freeze or set-off on any funds on deposit with the bank.

3)  Even though a debtor files bankruptcy, he or she is still considered to have an interest in any funds that are deposited in any account. The issue becomes whether the debtor’s right to exempt those funds are superior to the bank’s right of set-off. The bank is basically a general unsecured creditor, but it is subject to the debtor being able to exempt any funds that might be on deposit. However, the bank’s right of set-off gives it a right that takes priority over any other creditor’s claim to any funds on deposit. The majority view, which includes the Bankruptcy Court for the Western District of Pennsylvania, is that property which the debtor has been able to exempt, is not subject to set-off. Any funds that exceeds the amount that was able to be exempted may be set-off against the account.

4)  Any bank or financial institution is prohibited from setting off any debt by seizing Social Security Benefits.

5)  There is no right of set-off by the bank of any pre-petition debts against post-petition deposits in an account. Otherwords, only funds on deposit at the time of filing bankruptcy may be subject to being set-off. Any funds deposited after a bankruptcy is filed are safe and are not subject to set-off.

6)  An exception to the automatic stay permits the IRS to set-off a pre-petition tax refund against a pre-petition tax debt. The exception is only for taxes that you owed prior to filing bankruptcy. Any tax refunds that become due postpetition are not subject to being set-off. For instance, if you are in a Chapter 13 Bankruptcy and become entitled to any tax refund for any of the years after your initial filing, then the IRS is prohibited from attaching those refunds.    

Prior to filing for bankrptcy, if a person faces circumstances that may subject their funds to being seized by the bank or a financial institution, then the best way to prevent the freeze or set-off is simply to deplete the account.

If you find yourself in a similar type of situation or have any other questions about filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd today at 412 471-9670 or fill out our online contact information form and schedule a free consultation.

A person files a bankruptcy with the idea of getting rid of all of their unsecured debt. However, a person has the option of reaffirming a debt or entering into what is known as a reaffirmation agreement. The consequence of reaffirming a debt is that the debt is no longer wiped out by the bankruptcy and that the debtor will remain legally obligated on the debt despite the bankruptcy filing. Since you remain legally obligated on the debt, that means that you could continue to receive collection calls or be sued in court and possibly have your property attached if you fall behind on your payments. Also, if the debtor reaffirms a debt that does not bar the discharge of that debt in a subsequent bankruptcy case. That being the case, it is seldom a good idea to reaffirm a debt. There still can be legitimate reasons why a person might want to reaffirm a debt: 1) to keep collateral that secures a debt (There could be times where a person falls behind on payments on a secured debt and the debtor does not want to pursue or convert their case to a Chapter 13 Bankruptcy. In exchange for signing a reaffirmation agreement, the creditor may agree to a payment plan on the delinquent portion of the debt and agree not to pursue collection activities, such as repossession), 2) maintain credit privileges or to improve your credit record (The creditor will most likely no longer provide a person with payment coupons, any statements related to the account or continue reporting any payments to the credit bureau if the debt has not been reaffirmed).

CAR LOANS ARE THE TYPE OF DEBTS THAT ARE THE PRIMARY FOCUS OF REAFFIRMATION AGREEMENTS

Reaffirmation Agreements play a role in Chapter 7 Bankruptcies, but are not a part of Chapter 13. The primary focus is on consumer debts or automobile loans secured on your vehicle. The Bankruptcy Code was amended back in 2005. One of the changes was that if a debtor did not sign a reaffirmation agreement, then the lender would get an automatic relief from stay and could repossess the vehicle. The creditor very seldom pursued this option. Every case was looked at on an individual basis. Such things as the year and the value of the car were considered. In any event, state law oftentimes protected a person’s car from repossession, as long as the person was current on the payments. Signing a reaffirmation agreement or reaffirming the debt on your car can be a good thing if you can afford to make the payments. This can be a good way of rebuilding your credit and maintaining a good relationship with that particular lender should you want to purchase another car through them. If you are not able to make the payments or making the payments puts you in a difficult situation, then signing a reaffirmation agreement is probably not a good idea, as it can pose a major danger or risk. This debt is no longer discharged in your bankuptcy and should the creditor repossess the vehicle, then you can be held liable for the difference or deficiency that remains on the debt after the sale of the vehicle. If you find yourself in this situation, then simply continuing to make the regular monthly payments on the debt, better known as the ride through is probably the best option for you. Even though you are not able to use entering into a reaffirmation agreement as a way to re-build your credit, you are still able to keep and use your car.

REAFFIRMATION AGREEMENTS ARE REQUIRED TO CONTAIN CERTAIN INFORMATION

The Bankruptcy Code requires reaffirmation agreements to comply with certain terms in order to be in compliance:

1) must be in writing (The agreement is essentially a contract. You are basically entering into a new contract, so you could try to negotiate a lower payment or interest rate and even a reduction in the total amount of the debt that you owe. Some creditors may be receptive to new terms and others may not, but it is worth trying), and

2) entered into prior to discharge (The agreement must be entered into before the discharge order is entered. If you are in the process of negotiating a reaffirmation agreement and you are afraid that the discharge order may be entered rather soon, then the Bankruptcy Code allows you to file a motion to delay the entry of the discharge order so that you may finish the negotiations of your reaffirmation agreement), and

3) must contain certain “clear and conspicuous” statements (a. Under certain circumstances a reaffirmation agreement can be a good idea, but entering into a reaffirmation agreement is not required. Never let a creditor make you feel that you are required to enter into a reaffirmation agreement, and b.  If you entered into a reaffirmation agreement and later change your mind, you have a right to rescind. You can cancel the agreement anytime prior to discharge or within 60 days after it is filed with the court, whichever is later. However, you must notify the creditor in writing of your intention to cancel, and 

4) filed with the court (The agreement must be filed with the court and the 60 day time period to rescind does not begin to run until the agreement is filed with the court), and

5) attorney declaration or court approval (The attorney must file a declaration stating that the reaffirmation agreement is a fully informed and voluntary agreement that does not impose an undue hardship on the debtor. If the debtor’s budget shows that he or she does not have sufficient income to make the payments, then a presumption of undue hardship arises. The attorney is then required to certify that despite the debtor’s income situation that they are able to make the payments. In situations in which a presumption of undue hardship arises, the court must review any reaffirmation agreement. The court may only approve a reaffirmation agreement if it is convinced that the agreement does not impose an undue hardship and that it is in the best interest of the debtor. The court will schedule a discharge hearing to advise the debtor of his or her rights. It will again stress that reaffirmation is not required, the right of rescission and the potentional consequences of reaffirming a debt.

There are two other points worth mentioning regarding reaffirmation agreements: 1) The debtor is required to seek court approval on any consumer debt that is not secured by real property. Otherwords, entering into a reaffirmation agreement on your mortgage or any other debt that is secured on real property does not require court approval, and 2) The court is required to approve any reaffirmation agreement on a consumer debt where a presumption of undue hardship arises, except in the case of a credit union. Otherwords, if you car loan is through a credit union it does not matter if a presumption of undue hardship arises.

If you are interested in filing for bankruptcy or have additional questions about your options, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form and you will be immediately contacted today to schedule a free consultation.

Sometimes a person may file for bankruptcy and shortly thereafter decide that bankruptcy is really not a good fit for them. If you change your mind, then you should file a motion to voluntarily dismiss your case. Probably the most common reason for wanting to dismiss a case is that the debtor could lose a significant amount of assets. Normally, a debtor exempts all of his or her assets and they are fully protected, but there could be times when an exemption that was claimed gets denied or simply new assets are discovered. For instance, circumstances could arise where the debtor comes into certain monies that had not been expected. Also, a debtor may decide that they would like to dismiss their case, so that they could re-file and add on some additional debts that did not exist at the time of their first filing. The rules regarding the voluntary dismissal of your case are somewhat different depending on whether it is a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.

VOLUNTARY DISMISSAL UNDER A CHAPTER 7 BANKRUPTCY MUST BE “FOR CAUSE”

In a Chapter 7 Bankruptcy, the Court can only dismiss a case after a notice and hearing. That means that it is necessary for the debtor to file a motion and serve it upon all the creditors listed on the bankruptcy schedules. This being the case, the debtor still has no absolute right to dismissal in a Chapter 7 Bankruptcy. A dismissal can only be ordered by the Court upon a showing of cause. In otherwords, the debtor must give a reason for the dismissal. Just what constitutes cause is in the sound discretion of the Court. A number of factors are looked at  in determining whether to voluntarily dismiss a case. However, probably the main factor that the Courts consider is whether there are any assets available to distribute to unsecured creditors. The Courts perform somewhat of a balancing act: whether dismissal would be in the best interest of the debtor compared to the prejudicial effect on the creditor. Prejudice is considered to exist where the distribution of assets would be lost by the dismissal of the case. Even in that particular case, should the debtor be able to provide an assurance or guarantee that the creditors would be paid outside of the bankruptcy, then the Court may very well agree to dismiss the case. Generally though, it is almost impossible to have your bankruptcy dismissed if there are assets to be sold. If you have been able to exempt all of your assets meaning that it a no-asset case and no creditors have objected, then the Court will most likely allow your case to be dismissed.

DEBTOR HAS ABSOLUTE RIGHT TO DISMISSAL UNDER A CHAPTER 13 BANKRUPTCY

In a Chapter 13 Bankruptcy, a debtor has an absolute right to dismissal of their case, as long as it has not been converted from another chapter. The debor must file with the Court a notice indicating their intention to voluntarily dismiss their case. Even though notice and a hearing are not specifically provided for in the Bankruptcy Code, as with a Chapter 7 Bankruptcy, the Courts generally require that the notice be served on all creditors that are listed on your bankruptcy schedules. The Courts still must dismiss the bankruptcy case and are not permitted to convert the case to a Chapter 7 since the debtor has moved to dismiss the case. The Court should allow the case to be dismissed, even if a creditor has objected to the dismissal or seeks to have the case converted to a Chapter 7. Sometimes a debtor may face the choice of having the case dismissed or converted to a Chapter 7 Bankruptcy. Dismissal may be preferred if the debtor would lose significant assets in the conversion to a Chapter 7 Bankruptcy. Therefore, it is important to note that the right to dismissal in your Chapter 13 Bankruptcy is lost upon conversion. If the Chapter 13 case was originally filed under another chapter, the debtor may still seek to have the case dismissed, but must seek the permission of the Court through the motion’s process. The Court then weighs the various factors similar to those in a Chapter 7 Bankruptcy, as to whether dismissal is in the best interest of the debtor and does not prejudice the creditor.

One matter that needs to be considered when moving to voluntarily dismiss a case is that if debtor has the case dismissed and a Motion for Relief From Stay was previously filed, then the debtor is unable to file a new case for six months.

Once a case is dismissed the debtor is placed in the situation that he or she was in prior to filing the bankruptcy. Other words, creditors are free to commence collection activities as if no bankruptcy case had previously been filed. Any late fees or interest that accrued during your bankruptcy filing can now be added to the amount that you owe. However, you are free to again file another case under either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.

If you are uncertain about your situation and have many questions about bankruptcy that would help you in making your decision, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form. An appointment for a free consultation will be scheduled today.

Oftentimes a person filing bankruptcy is the owner of a car that is secured by an automobile loan. Sometimes they are upside down or have negative equity in the vehicle. Other words, they owe more on the car than what is is worth. The Bankruptcy Code provides powerful tools that allow a debtor to limit the liens of secured creditors. There are basically two different approaches that a debtor could take depending on whether they filed a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.

THE RIGHT OF REDEMPTION IN A CHAPTER 7 BANKRUPTCY CASE        

There is what is known as a right of redemption in a Chapter 7 case. The security interest held by the creditor can be eliminated upon making payment to the creditor of the value of the collateral, namely the car. The Bankruptcy Code lists certain requirements that need to be met to qualify for the right of redemption:

1. tangible personal property, and (This must be property that has been exempted by the debtor or abandoned by the Trustee. Even if the debtor has no equity in the property, so long as the debtor has a legal interest of any kind, then the property may be claimed as exempt)

2. intended primarily for personal, family or household use, and (Generally, in order to redeem a piece of property, the redemption must be for the benefit of the debtor and not for the benefit of another person)

3. must be a consumer debt, and (The Bankruptcy Code defines a consumer debt as a debt incurred by an individual primarily for a personal, family, or household purpose)

4. dischargeable debt 

A redemption allows the debtor to keep their car and pay the creditor only the acutual value of the car, not the amount of the debt. Assume the debtor had a car worth 8,000, but the amount of the automobile loan was 15,000 at 8%. The debtor could finance the car and only payback the value of 9,000 at 24%. Of course the interest rate is higher, but the monthly payment would most likely still be lower than the current payment. In order to allow the debtor to make the lump-sum payment to the creditor, there are companies that provide redemption financing. Probably the best known is 722 Redemption Funding that can be found at www.722redemption.com or Redemption Financial Services at www.redemptionfinancial.com.

CHAPTER 13 BANKRUPTCY PROVIDES A TOOL KNOW AS THE CRAMDOWN

The Bankruptcy Code has a provision similar to the right of redemption utilized in a Chapter 7 Bankruptcy likewise in a Chapter 13 Bankruptcy. A debtor can change or modify the terms of the contract held by the secured creditor. That provision provides for what is known as the cramdown. The cramdown is where the debtor pays for the value of the collateral, namely the vehicle in this instance, as opposed to the full amount of the debt. In order to utilize the cramdown on your car the following conditions must exist:

1.  purchase money security interest, and (The entire amount financed must be on a motor vehicle to be considered a purchase money security interest and would not include situations where the collateral secured a debt other than the price of the vehicle; a consolidation or refinancing of the automobile loan would destroy its’ status as a purchase money security interest).

2.  incurred more than 910 days preceding the filing of the bankruptcy petition, and

3.  collateral must be a motor vehicle, and (This provision reads that the collateral for the debt consists of a motor vehicle. If  the debt is secured by any other collateral, then the restriction of the 910 days would not apply).

4.  acquired for the personal use of the debtor (A vehicle that is purchased for a business use or for the use of someone other than the debtor is not considered as personal use of the debtor).

Sometimes a debtor may want to trade-in the car that they currently have toward the purchase of a new car. On occasion, their current car may be worth less than the amount that they owe on their loan, so they finance the difference as part of the purchase on the new car. The creditor does not have a purchase money security interest that secures the entire amount of its’ claim. The question becomes whether this negative equity is included in the purchase money security interest. The courts take the view that the financing of negative equity is simply converting unsecured debt into secured debt. Pennsylvania takes the view that the portion of the claim that is a purchase money security interest shall remain. Even if you are unable to get past the 910 day rule, any amount that you have paid toward negative equity will be excluded from the lender’s purchase money security interest.

Besides being able to utilize the cramdown, the debtor can lower the monthly payment on the car loan by lowering the interest rate and possibly paying the loan over a longer period than provided by the terms of the loan.

If your automobile loan creates a burden for you and you would like to readjust your debt or simply have other questions about filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our contact form and you will be contacted shortly to schedule an appointment.

A person can file a bankruptcy almost anytime in their effort to obtain a fresh start and put their financial problems behind them. However, there are certain restrictions on whether the filing can be under Chapter 7 or Chapter 13.

ELIGIBILTY TO FILE A CHAPTER 7 BANKRUPTCY

a.  A person can only file a Chapter 7 every eights years. The eight year time period restricts the filing of your case within eights years of your present filing. Other words, it is calculated from the date of filing not the date of discharge.

b.  A person cannot file a new Chapter 7, if they previously filed a Chapter 13 in which they received a discharge, and the new Chapter 7 is being filed within six years from the date of the filing of the Chapter 13. Again, it should be pointed out that the calculation is from the date of filing not the date of discharge. An exception to where a person would be able to file a Chapter 7, where the filing of the Chapter 13 which resulted in a discharge is less than six years from the previous filing, is where creditors in the earlier case were paid at least 70 percent of their claims.

ELIGIBILITY TO FILE A CHAPTER 13 BANKRUPTCY

a.  A person cannot receive a discharge in a Chapter 13, if they previously filed a Chapter 7 in which they received a discharge, and the filing of the new Chapter 13 is being filed within four years of the previous filing of the Chapter 7. Again, it should be pointed out that the relevant time period is from the date of filing not the date of discharge.

b. A person cannot receive a discharge in a Chapter 13 case, if they previously filed a Chapter 13 in which they received a discharge, and the filing of the new Chapter 13 is being filed within two years of the filing of the previous Chapter 13. Again, it should be pointed out that the calculation is from the date of filing not the date of discharge.

ELIGIBILITY TO FILE A CHAPTER 13 BANKRUPTCY EVEN IF UNABLE TO RECEIVE A DISCHARGE

A person can still file a Chapter 13 Bankruptcy even though they may not be eligible to receive a discharge. The main benefit is that you will still receive the protection of the automatic stay. This is what prohibits creditors from proceeding against you. That being the case, you could file to cure a mortgage default or any other type of default.

IMPORTANT DISTICTION BETWEEN CHAPTER 13 AND CHAPTER 7

An important distinction between Chapter 13 and Chapter 7 is that a person can file a Chapter 13 and receive a discharge that is within eights years of a prior filing of a Chapter 7 that resulted in a discharge. Other words, the receiving of a discharge in the Chapter 13 is less than the eights years required to receive a discharge in a Chapter 7.

Since most Chapter 13s last anywhere from three to five years, a prior Chapter 13 will almost never prevent a person from filing a new Chapter 13. In essence, there are basically no restrictions on a person’s ability to file a Chapter 13.

If you are seriously thinking about filing bankruptcy or simply have unanswered questions, then give Pittsburgh Bankruptcy Attorney Rodney Shepherd a call today at 412 471-9670 or fill out our client contact form. An appointment will be scheduled in which you will receive a free consultation to assist you in obtaining your much deserved fresh start.

A Chapter 13 Bankruptcy is a readjustment of all of a person’s debts thereby establishing a repayment plan. This repayment period can be anywhere from three to five years.  In any event, the ultimate goal of filing a Chapter 13 is to obtain a discharge. A discharge is to be issued upon the completion of all payments into the Chapter 13 Plan.

The whole idea behind filing a bankruptcy is to eliminate a person’s debts. A bankruptcy wipes out most unsecured debts. These can include medical bills, personal loans, past due utility bills, business debts, charge accounts, collection agency debts and late fees. The discharge in a Chapter 13 case is oftentimes broader that that recived in a Chapter 7 Bankruptcy. The discharge in a Chapter 13 wipes out all debts that were provided for in the Chapter 13 Plan, except:

a. domestic support obligations, or (This generally refers to any child support, spousal or alimony owed to a spouse, former spouse or child of the debtor)

b. most student loans, or (There is a rare exception to discharging student loans. A hardship discharge can be sought. This does not include a financial hardship by itself, but usually must be of the type that is a long-term health condition that will prevent the debtor from being able to make payments on the loan) 

c. debts for restitution or damages awarded in a civil action that were the result of the willful or malicious injury by the debtor that caused personal injury or death

d. certain criminal fines or restitution that were included in the sentence of the debtor’s criminal conviction, or

e. certain drunk driving debts, or (These are for debts that the debtor has incurred due to the unlawful operation of a motor vehicle, vessel or aircraft while intoxicated and that resulted in the personal injury or death. It may still be possible to discharge damages to property)

f. long term debts in which the final payment falls due after the completion of the plan; or (This most often refers to a mortgage debt, whereby the mortgage arrears have been cured upon the completion of the Chapter 13 Plan, but the final payment does not fall due until several years later)

g. tax debts, or (Benjamin Franklin once said that two things are certain in life, death and taxes. There are limited situations where some old taxes can be discharged. Even under those circumstances if a tax return is unfiled or late or a fraudulent return is filed, then those taxes would not be dischargeable)

h. debts that have been incurred by false pretenses or fraud; or (In order for a debt of this type to be nondischargeable, the creditor has to file a timely motion objecting to the discharge of this particular debt and the Court must rule that the debt is in fact nondischargeable)

i. debts not listed in the bankruptcy, or (All of the debts that you are wanting to discharge in your Chapter 13 needs to be listed in your bankruptcy forms. A Chapter 13 is considered to be an asset case and therefore a creditor is entitled to notice of the bankruptcy filing and to be provided with the opportunity to file a proof of claim. This is simply a breakdown or an itemization of the amount that the creditor claims that is owed. This to allow the creditor to be able to possibly share in any monies that are to be distributed from the bankruptcy estate)

j. debts for fraud while acting as a fiduciary, or (This is similar to the type of debts incurred through false pretenses. The creditor must file a timely motion objecting to the discharge of this particular debt and the Court must in fact agree that the debt is nondischargeable).

The Chapter 13 Bankruptcy discharge may eliminate or wipe out certain debts that are not dischargeable in a Chapter 7 Bankruptcy.  Those debts that are dischargeable in a Chapter 13 include:

a. willful and malicious injury to property, or (Debts owed to an individual that arose from the debtor’s willful and malicious acts that have not been awarded restitution or damages are dischargeable)

b. marital settlement agreements, or (Debts that you owe to an ex-spouse that are part of a divorce or separation agreement that are not in the nature of support are dischargeable)

c. certain fines and penalties, or

d. debts incurred to pay nondischargeable taxes

Before a debtor can receive the full benefits of a discharge it is necessary to determine whether any creditor has secured its’ claim by placing a lien on your property. The most common way that a creditor gets a lien on your property is by obtaining a judgment. It will be necessary to avoid that lien or the creditor will retain the right to collect on that judgment. Any personal liability on your part will be wiped out, but the creditor can file an action to collect against the particular property.

If your circumstances are such that you are in need of filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our online client contact information form to schedule an appointment for a free consultation.  Attorney Shepherd will explain the differences between a Chapter 7 Bankruptcy and a Chapter 13 Bankruptcy and which option is best for you.

CREDIT CARD USE OR OBTAINING A CASH ADVANCE PRIOR TO FILING BANKRUPTCY  MAY CREATE A PRESUMPTION

A debtor who has incurred consumer debts in excess of $675.00 owed to a single creditor for luxury goods or services within 90 days prior to filing bankruptcy or who has taken out a cash advance on an open ended credit plan that totals more than $950.00 within 70 days prior to filing bankruptcy, then such debts are presumed to be nondischargeable. This means that those debts are presumed to have been incurred through false pretenses, false representation or actual fraud. Otherwords, it is presumed that the debtor had no intent to repay those debts at the time they were incurred.

PRESUMPTION IS ONLY REBUTABLE AND MAY BE OVERCOME

However, this is simply a presumption and the debtor may rebut the presumption by showing evidence that there was in fact an honest intent to repay the debt at the time it was incurred or that the debt was not for luxury goods or services, as defined by the statute or that the cash advance that was taken out does not fall within the covered definition. This presumption can also be overcome if the debtor can show that there has been a change in circumstances from the time the debt was incurred. Also, the presumption would be rebutted if the debtor can show that the credit card was used without his or her knowledge or permission. Many courts have held that such a presumption can be implied, as opposed to simply being expressed. This is basically to prevent the debtor from going on a spending spree shortly before filing bankruptcy. Once the debtor rebuts the presumption, the burden of proof shifts to the creditor to prove fraudulent intent. It is not sufficient to simply show that a debt was incurred and not paid because this is true of all debts. Usually, unless the debtor makes an admission, it is very difficult to produce any evidence that would be able to prove a fraudulent intent. Keep in mind, that unless the creditor files a timely objection to the dischargeability of the debt, then the presumption does not even come about. If you are facing such a factual situation where the presumption could arise, then you might want to delay the filing of the bankruptcy in order to get past the relevant time periods. It is important to keep in mind that the time periods are only relevant with respect to the automatic presumption. Any debts that are incurred prior to those time periods can still be found to be nondischargeable if fraud or false pretenses can be proven.

CREDIT CARD USE MUST BE BE FOR LUXURY GOODS OR SERVICES

The discussion of credit card use would not be complete without a more thorough definition of luxury goods or services. Just what are luxury goods or services depends on the particular facts and circumstances of each case. Such items that constitute luxury goods or services include expensive jewelry, Christmas gifts, expensive floral arrangements, high-end clothing, expensive cosmetics, but such list is not exclusive and can include many more items. Luxury goods or services do not include items that were reasonably acquired for the support or maintenance of the debtor or the debtor’s dependents. Items that would be excluded would be moderately priced clothing, Barbie dolls and accessories and even a new Chevrolet Lumina.

CASH ADAVANCES PRIOR TO THE FILING OF BANKRUPTCY CAN CAUSE PROBLEMS

Taking out a cash advance of more than $950.00 within 70 days prior to filing bankruptcy can cause problems. A cash advance must be an extension of consumer credit under an open end credit plan. This basically means that the cash advance must be under a plan where the creditor expects repeated transactions and the terms of the transaction have been spelled out and there is a finance charge on the unpaid balance.

If you are thinking about filing bankruptcy, but are not certain about when would be the best time to file.  Call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412-471-9670 or complete one of our client contact forms for a free consultation.

EMPLOYERS CANNOT DISCRIMINATE AGAINST A PERSON SOLEY BECAUSE THEY FILED BANKRUPTCY

The Bankruptcy Code prohibits conduct by a governmental or private employer that would discriminate against a person solely because they have filed bankruptcy, has been insolvent before the commencement of the case or has discharged a debt in bankruptcy. It is first necessary to determine whether an employment relationship does in fact exist. This generally means that you were in an employment position at the time the bankruptcy petition was filed. The prohibition does not extend to hiring or other types of decisions where the debtor was not yet an employee of the employer on the date the bankruptcy petition was filed. The definition of an employment relationship is quite broad and may include situations generally not thought to be included.

EMPLOYERS CAN STILL DISCRIMINATE FOR OTHER REASONS, BUT THE COURTS MAY STILL FIND A VIOLATION

A governmental or private employer are clearly prohibited from discriminating against a debtor with regard to their employment. This prohibition extends to discrimination regarding any aspect of a debtor’s employment. The debtor must prove the offense or act committed by the employer was due soley because of the debtor’s bankruptcy filing, being insolvent before the commencement of the case or the non-payment of a dischargeable debt. If the employer can show that there were other reasons for its’ conduct toward the employee, then there is no violation. If a debt is of the type that is nondischargeable, then any discrimination is not prohibited. A debtor can encounter problems in proving the actual motivation of the employer if the employer provides other reasons for its’ actions. Even when the employer provides its’ other reasons for the discrimination, the Court can still disregard those other reasons if they appear to be frivolous and deem that a violation has in fact taken place. If it is determined that a violation has taken place, then the debtor is entitled to injunctive and declaratory relief. Such relief could be in the nature of the actual reinstatement of the employment position, if the debtor had already been terminated or even the promotin of the debtor to a new position, if such promotion had been previously denied. Not only can the debtor be awarded injunctive or declaratory relief, but an award of monetary damages for lost wages is a possibility, excluding any punitive award. The Court generally will not award attorney fees either. The Bankruptcy Code gives the Court considerable leeway in fashioning remedies to allow the debtor to reap the benefits of a fresh start that the filing of bankruptcy is intended to provide. It should be pointed out that these awards are generally for actions that occur after the bankruptcy case is filed and are not property of the bankruptcy estate. This means that a debtor in a Chapter 7 Bankruptcy can keep any award since it is not property of the estate.  However, since the duration of a Chapter 13 is normally for five years, any award may become property of the estate and require a payment to unsecured creditors.

If you have questions about just how the bankruptcy process can play out, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or complete our client contact form.  Every effort will be made to answer your questions and to provide you with a more detailed explanation of the entire process.

Chapter 7 Can Prevent Your Drivers License From Being Suspended

The main objective behind allowing a person to file for bankruptcy is to provide that individual with a fresh start in life. The Bankruptcy Code clearly prevents the government from discriminating against a debtor by suspending, denying or revoking their driver’s license solely because they failed to pay a motor vehicle related judgment that would be dischargeable in their bankruptcy. Other words, if the debt is dischargeable in bankruptcy, then the license cannot be denied. Likewise, the State is prohibited from creating any licensing or other type of requirements simply because a person filed for bankruptcy. The whole idea behind the prohibition against discrimination is that a person with a discharged debt should be treated the same way as a person who never had any type of debt.

However, it should be pointed out that if other reasons exists for the government’s action, then such action may be permissible and not be a violation. An example of such a situation would be where a license has been suspended or revoked due to a certain number of points being assessed after various traffic violations. If the law that is being applied to you is not designed to coerce the payment of a debt that would be dischargeable in bankruptcy and requires the same actions from debtors and non-debtors alike, then there is no violation.

In order to have your license restored there are certain documents that will need to be provided to the Pennsylvania Department of Transportation:

1. Proof that the Bankruptcy was filed (a certified copy of the cover sheet to the bankruptcy petition),
2. Copy of the bankruptcy schedule that list the motor vehicle judgment to be discharged,
3. Affidavit stating that the judgment is not for personal injuries or death caused by the debtor’s operation of a motor vehicle while  intoxicated, and
4. Proof of current financial responsibility for any vehicle titled in the debtor’s name, or an affidavit stating that the debtor does not have any vehicles titled in his or her name.

Once all of this documentation has been provided to the State, then your license will be restored. The Pennsylvania Department of Transportation will not mail your license to you. It will still be necessary to go to your local license branch to reapply and have the license reissued. Sometimes a person fails to provide this information to the State while their bankruptcy is still active. Even if you provide all of the above-mentioned documentation after your bankruptcy has been discharged and closed out your license can still be restored.

Chapter 13 Is Your Best Alternative, If The Debt Is Of The Type That Is Non-Dischargeable In A Chapter 7

The typical type of debt that causes a person’s driving privileges to be suspended is where a money judgment has been entered against them due to a motor vehicle accident. Upon filing a chapter 7 bankruptcy that type of debt can be discharged and you can have your license restored. However, there are times where an individual’s driver’s license is suspended due to the non-payment of traffic fines. Traffic fines are generally not dischargeable in a chapter 7. The filing of a chapter 13 bankruptcy may allow you to disharge certain debts that would not be dischargeable in a chapter 7 bankruptcy. For instance, traffic fines are generally dischargeable in a chapter 13. If the debt is of the type that will be discharged upon the successful completion of the chapter 13, then the debtor is entitled to have their license renewed during the pendency of the chapter 13. Should the debtor’s chapter 13 bankruptcy get dismissed or it becomes necessary to convert their case to a chapter 7 bankruptcy, then the State would be able to again suspend or revoke their driver’s license. Criminal fines are clearly not dischargeable in either a chapter 7 bankruptcy or a chapter 13 bankruptcy. However, a debtor may provide for these debts in their chapter 13. The automatic stay would prohibit any collection efforts, which could include the revocation of your driver’s license.

If your driver’s license has been revoked or suspended for the reasons listed above, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412-471-9670 or complete our client contact form to discuss the necessary steps to have your driver’s license restored.

THE BANKRUPTCY CODE PROVIDES PROTECTION TO THE DEBTOR FROM BEING DISCRIMINATED AGAINST BY THE UTILITY COMPANY

Having utility service is considered of utmost importance in society. If the service was ever terminated it could make a person’s life somewhat miserable. In order to prevent a situation like this from occurring, the Bankruptcy Code tries to strike a middle ground between the person filing bankruptcy and the utility provider. Most people feel that a utility provider includes simply public providers of electric, gas, telephone, water and sewage services. The definition is much broader and includes suppliers of utilities such as landlords, condominium associations and other entities that may be responsible for having utilities supplied to debtors.

THE DEBTOR IS FULLY PROTECTED DURING THE FIRST 20 DAYS AND MAY EXTEND SUCH PROTECTION 

A utility provider is prohibited from discontinuing or refusing services simply because a person has filed bankruptcy and has not paid a debt that existed prior to the bankruptcy filing. During the first 20 days a debtor is protected from their service being terminated. The utility company, however, can require a deposit or an adequate assurance of future payments. The amount of the deposit is based on a person’s prior usage and varies. A good estimate is about two monthly budget payments. There are normally only two utility providers in this district that require a deposit, the electric and the gas. Upon receiving the deposit, any pre-bankruptcy debts would be wiped and a new account would be opened with a zero balance. During the 20 day period, the debtor may file an action in court seeking to have the amount of the deposit modified or allowing it to be paid in installments. The utility providers are not without options if a person does not pay the deposit within the 20 day period nor have the time period extended. The utility company may terminate or refuse service after the 20 day period.

YOUR UTILITY SERVICE MAY HAVE ALREADY BEEN TERMINATED BUT RESTORATION OF SUCH SERVICE IS REQUIRED 

Sometimes a person’s utility service has already been terminated prior to their filing for bankruptcy. The Bankruptcy Code requires that the utility provider restore service upon the filing of the bankruptcy case. The utility company can require a deposit or some form of adequate assurance of future payments, within the 20 day period from the filing of the bankruptcy. The adequate assurance requirements may be somewhat different from a person who already has service, since restoring service basically makes a person a new customer and the adequate assuance requirments for this type of person could be different.

WAIVER OF THE REQUIREMENT OF THE DEPOSIT MAY BE A REAL POSSIBILITY

There are situations where a person has always paid their utilities. Even under these type of circumstances the utility company still expects that a person pay a deposit. However, if the debtor has a past payment history showing that payments have always been made on a timely basis, then it is possible that the utility company will waive this requirement. The payment history should serve as a type of adequate assurance. Debtor’s counsel should contact the attorney for the utility company and bring to his or her attention the debtor’s past payment history to see whether the waiver requirements are met.

If you have many unanswered questions about bankruptcy and would feel more comfortable by having a free consultation, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412-471-9670 or complete our client contact form.  He will make every effort to answer your questions and to put you fully at ease.

DOMESTIC SUPPORT AND PROPERTY SETTLEMENT AGREEMENTS ARE NOT DISCHARGEABLE IN A CHAPTER 7 BANKRUPTCY

In a Chapter 7 bankruptcy, the Bankruptcy Code excepts from discharge domestic support obligations. This definition includes any debt that is owed to a spouse, former spouse, child of the debtor, such child’s parent, legal guardian or governmental unit that is for alimony, maintenance or support or is in the nature of alimony, maintenance or support. For instance, if the paying spouse agreed to pay certain expenses of the other spouse for a lower support obligation, then this would be in the nature of support and not dischargeable. The definition also includes both pre-petition and post-petition obligations, as well as any interest on those debts. A rare instance in which support is dischargeable is when it has been assigned to another entity for other than collection purposes. The obligation to pay alimony, maintenance and support has always been considered of utmost importance, and the obligations under a marital property settlement agreement has evolved into becoming a top priority in a chapter 7 bankruptcy and also is not dischargeable.

CHAPTER 13 BANKRUPTCY CAN BE USED TO CURE DELINQUENT SUPPORT ARREARS

As in Chapter 7, domestic support obligations are excepted from discharge in a Chapter 13 bankruptcy. Other words, debts for alimony, maintenance or support or that are in the nature of alimony, maintenance or support will survive bankruptcy. However, one of the benefits of a Chapter 13 is that you are permitted to pay back your delinquent support obligations over the life of the Chapter 13 Plan, which can be up to five years. Assuming that you make all of your plan payments, upon the completion of the plan all of your delinquent support payments will now be paid off. In order to receive a discharge, it also necessary that you continued making all of your ongoing support payments. In fact, upon the completion of your case, you must certify that all ongoing support payments, as well as any support payments paid through your plan have been paid.

MARITAL PROPERTY SETTLEMENT AGREEMENTS MAY BE DISCHARGEABLE IN A CHAPTER 13 BANKRUPTCY

Another benefit to a Chapter 13 is that you can discharge a marital property settlement agreement. Confusion sometimes arises in determining the definition of a property settlement agreement. The main factors that courts consider in determining whether the debt is in the nature of support or a property settlement agreement are: 1) whether the payments terminate upon the death or remarriage of the spouse who receives the payments; 2) whether the payments are paid over a period of time, as opposed to some type of lump-sum payment; 3) whether the payments are based on the receiving spouse’s future earning capacity; and 4) whether the payments are for such items as medical care, mortgage or other basic necessities of life of the receiving spouse. If these factors were contemplated in determining the payment, then the payment will most likely be considered to be in the nature of support rather than a property settlement agreement and therefore not dischargeable. However, debts that you owe to a former spouse that were agreed to in a divorce or separation agreement and are not in the nature of support are dischargeable in a Chapter 13 bankruptcy. In a Chapter 13, it is necessary that you list all of the creditors that you are wanting to discharge. That list would include your former spouse. Also, in order to get a discharge you must complete the terms of your Chapter 13 Plan that was previously confirmed.

If you are faced with similar circumstances or are contemplating filing bankruptcy, then give Pittsburgh Bankruptcy Attorney Rodney Shepherd a call at 412 471-9670 or just fill out our client contact form.  You will be immediately called and a free consultation will be scheduled today.

DEBTS NOT LISTED MAY STILL BE DISCHARGED IN A CHAPTER 7 BANKRUPTCY

When a person files bankruptcy it is very important that they list all of their debts. It is not only a good idea to gather all of your bills, but also to supplement those bills with a credit report. You can get a free credit report through www.annualcreditreport.com. In fact, this link can be found on my website. Oftentimes after a case has been filed, but before it is finished, a debtor may decide that they have a debt that they failed to list on their Bankruptcy Petition. As long as the debt was one that was owed at the time of the filing of the Bankruptcy Petition, it can be added to the list of creditors. An amendment of schedules should be filed adding this additional creditor to the Petition. This will provide that particular creditor with notice of the bankruptcy filing and avoid any claims by the creditor alleging failure of service. This creditor has been added to the Petition and the bankruptcy has proceeded forward and is now closed. Occasionally, a debtor will find another creditor that was inadvertently omitted from the Bankruptcy Petition or even one that they were completely unaware of. The Bankruptcy Code addresses two categories of unscheduled debts. The first type of debts are those that arise from intentional torts, such as debts incurred by false pretenses, fraud or willful and malicious injury. These type of debts clearly are not dischargeable. The other type of unlisted debt that is not dischargeable is where the particular creditor by not being listed was not provided with a sufficient amount of time to file a proof of claim. This is what a creditor would file in an asset case itemizing the amount owed on its’ claim. Most Chapter 7 Bankruptcies are considered no-asset cases. That means that all of the assets that have been listed on the petition have been fully exempted, so the trustee will not be able to take any of the property and sale it in order to distribute the proceeds to creditors. These unlisted or unscheduled debts are considered to be discharged just the same as if they had been originally listed on your Petition. The reason is that these creditors are not being prejudiced because they would not have received anything even had they been listed. This goes in  keeping with the notion of allowing the debtor to have a fresh start on the road to financial recovery.

DEBTS NOT LISTED DO NOT GET DISCHARGED IN A CHAPTER 13 BANKRUPTCY

A Chapter 13 Bankruptcy is somewhat different as it is considered an asset case. Each creditor listed on the Bankruptcy Petition is provided with a notice of the bankruptcy filing and a bar date in which to file a proof of claim. A creditor can be added during the bankruptcy and is provided with the opportunity to file a proof of claim. Once the case is closed, the debtor’s bankruptcy is not considered effective against any unlisted or unscheduled debt. That particular creditor is considered to have been denied the right to participate in any assets of that particular bankruptcy estate. As you can see, it is very important to make sure that you file a complete list of your creditors at the time of the bankruptcy filing.

If you find yourself overwhelmed with debt, then give Pittsburgh Bankruptcy Attorney Rodney Shepherd a call at 412 471-9670 to schedule an appointment. Attorney Shepherd will help you obtain that fresh start in life, so that you will no longer be a slave to your creditors.

Generally, yes. Bankruptcy is a court process that can wipe out your debt and put you on the path to financial freedom. However, bankruptcy only discharges a debtor’s personal liability on the debt. Bankruptcy does not eliminate liens—notices that a creditor can attach to your property to proclaim to the world that you owe them money. These liens can be a real headache because they will prevent you from selling the property without paying the debt.

There are different types of liens, but a judicial lien is the kind that we are primarily concerned with in bankruptcy. A judicial lien occurs when a creditor files suit against you and obtains a judgment. The lien is then indexed in the court docket.

AVOIDING LIENS IS A CRUCIAL STEP IN THE BANKRUPTCY PROCESS

As part of the bankruptcy process, an experienced bankruptcy attorney will help you take additional steps to avoid liens. Following are two conditions under which you can avoid liens in bankruptcy court:

• If you have a house, the lien may be avoided based on a calculation that takes into consideration the value of the property, the amount of any secured loans, the amount of the available exemptions, and the lien attached to the property.
• If a judgment is obtained against you within 90 days prior to the filing date of your bankruptcy, then the lien can be avoided.

Lien avoidance can be the key to any fresh start, and it is important to tell your bankruptcy attorney about any outstanding judicial liens that you know of so that he can assess the impact on your specific situation.

HIRING A BANKRUPTCY ATTORNEY MAY BE THE SMARTEST MONEY YOU EVER SPENT

Are you looking for help with your bankruptcy case? Attorney Rodney Shepherd has helped countless people eliminate debt and avoid liens. Contact him today at the number at the top of this page or fill out his handy contact form to learn how he can help you.

The whole process takes about  4 1/2 months from the date that you filed your petition.  You first have your meeting of creditors usually within 30 days.  Creditors are provided with a 60 day time line to review your case from the first date set for your meeting of creditors.  After that deadline has passed, then the case is normally closed out in about a month to a month and a half.  There are occasions where your case may fall through the cracks and it will be necessary for me to call the clerk’s office to have it closed out.  You will receive a discharge order and final decree in the mail officially discharging your debts and closing out your case.

During the 60 day time period that creditors have to review your case, it is necessary that you obtain a debtor education certificate.  This is the second course that you are required to take and is oftentimes called a pre-discharge course.  It is basically a budget class.  You must be certain to obtain it before that 60 day deadline or your case will be closed out without discharge.  That means that it will be necessary for you to refile.  You can oftentimes obtain your certificate from the same place that you obtained your certificate of credit counseling from.  Here are just a few of the places that you can contact:  www.summitfe.org , www.beadviser.com , www.PreBK.com , www.advantageccs.com , www.bothcourses.com , www.AccessBK.org .  If you do not have a computer, then you can call Advantage Credit Counseling at 1-866-409-2227, which is the only local office that is located at 2403 Sidney Street, Pittsburgh, PA  15203 and do it in person or over the telephone.

The majority of Chapter 7 Bankruptcy cases are rather simple and routine.  The entire bankruptcy process takes approximately 4 to 4 1/2 months.

Once the petition is filed, the court will send out an official notice informing your creditors that you have filed bankruptcy and appointing a trustee. This notice will also schedule a meeting of creditors, which is held approximately 30 days after you file. You are required to attend the meeting. These meetings are held on the hour between 9:00 a.m. and 4:00 p.m. They are quite brief and last only about five to ten minutes. There are about eight to ten cases per hour, so you generally will not be there more than an hour. Occasionally, a person may have a conflict and so it would be somewhat difficult to attend the meeting. There is no need to worry, as the court permits everyone to miss at least one meeting and  allows the Trustee to reschedule a new one. Also, an option available to a person who suffers from an illness or some other exceptional hardship is to file a motion and to be excused from attending the meeting of creditors and to participate by telephone.

As I previously stated, a Chapter 7 Bankruptcy Trustee is appointed to your case. At least 7 days prior to your meeting of creditors, there are certain types of documentation that you are required to submit to the trustee.  Such items include copies of your tax returns for the past two years and paystubs for the past 3 months or current income information. The purpose of the meeting is to obtain additional information about your case. At the meeting, the trustee will ask the debtor a series of questions to verify the accuracy of the information on the bankruptcy petition, particularly regarding the debtor’s assets and liabilities. The questions are rather routine, but include the following:

Please show me your social security number (You will need your original social security card or some other type of original document that shows you social security number, such as an original W-2, Medicare card, etc.)

Please show me your picture I.D. (This can be your driver’s license or State photo identification or some other information to establish your identity.)

Did you sign the petition, schedules, statements and related documents and is the signature your own? Did you read the petition, schedules, statements and related documents before you signed them.

Are you personally familiar with the information contained in the petition? Is the information contained in the petition and related documents true and correct? Are there any errors or omissions?

Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?

Have you previously filed bankruptcy? (In order to be eligible for a Chapter 7 Bankruptcy discharge, a petition can only be filed every eight years. Otherwise, it will be necessary to file a Chapter 13 Bankruptcy).

What is the address of your current employer? (This information is also required to be listed on Schedules I.)

Is the tax return you provided a true and correct copy of the most recent tax return you filed? Are all tax returns that are due been filed? (If you are not required to file tax returns, then you should provide an affidavit to that effect and provide it to the Trustee at or prior to the meeting.)

Do you have a domestic support obligation? (This is normally an obligation in the nature of child support, spousal support or alimony. If you do have such an obligation, it will be necessary for you to provide the Trustee with the name and address of the person to whom you pay support.)

Do you expect to receive anything of value within the next six months? (This would include such things as an inheritance, gambling winnings or any other thing of value).

Does anyone owe you any money? (If you are owed money, then the question comes down to whether it is collectible.)

Do you have a claim or potential claim against anyone? (This would include such items as a personal injury claim or any other lawsuit.)

Do you own or have any interest in any real estate? (If you have a home you will need to substantiate why you think it is worth the amount that you listed on the schedules and how you arrived at that amount.)

Have you made a transfer of any real or personal property? (The Bankruptcy Code prohibits the transfer of any property not in the ordinary course of business. This means that you are not allowed to transfer any property to someone for less tha the fair market value, such as for $1.00 or a nominal amount shortly before filing bankruptcy. The Bankruptcy Code restricts the transfer within two years prior to filing and State law restrict the filing within five years.) 

Have you read the Bankruptcy Information Sheet? (This is an information sheet that provides various information about the types of bankruptcy, the bankruptcy discharge and the entering into a reaffirmation agreement. Normally, this will be mailed to you prior to the meeting or you can obtain a copy of it at the meeting of creditors.)

What was the reason for you filing bankruptcy? (There is no right or wrong answer to this question. Almost any answer is satisfactory. You might want to say that your income was reduced due to a job loss, you overextended yourself on your financial obligations, you had a serious medical condition. etc.)

These are probably the majority of the questions that will be asked. However, based upon a person’s responses, the Trustee may want to ask some additional questions. Also, the Trustee may want to see some additional documentation to support some of the figures that you have listed on your schedules. The meeting may be continued to another date to give you the opportunity to get this information. Assuming that you are able to provide this information prior to the meeting, then there is generally no need to attend this newly scheduled meeting. After the Trustee has reviewed your information and if he or she has determined that there are some inconsistencies, then an amendment to the schedules can be filed that will generally cure or resolve the problem.

The Trustee is normally the only person to question you during the meeting. However, any one of your creditors are free to show up and examine you. This rarely occurs. If anyone  does show, all they can do is ask you some questions. From their standpoint, the meeting is a time engage in discovery and determine your ability to pay anything toward their debt. In order for them to do anything some action has to be filed in court. This is seldom done, so it is not likely that you will be required to appear in court.

Upon the conclusion of the meeting of creditors, the trustee can either close out the meeting or continue it to another date, as was previously discussed. Most of the time the meetings are closed out and no further proceedings are required. If it is determined that the debtor is unable to exempt his or her assets or has more than nominal assets, then it is required that such assets be turned over to the Chapter7 Trustee, who will then liquidate them and turnover any proceed received to pay creditors.

The scheduling and the rules regarding the meeting of creditors are about the same for a Chapter 13 Bankruptcy. These meeting are also on the hour and may last about ten to fifteen minutes. Unlike a Chapter 7 Bankruptcy, these meeting are usually held in a closed room, with just you and your attorney present. On occasion, a representative from your mortgage company, car lender or taxing authority may also be present. The Chapter 13 Trustee will examine you to determine whether the Chapter 13 Plan that you have proposed is feasible and whether you have the ability to make plan payments and whether there are any grounds to object to the plan. Upon the conclusion of the meeting, the trustee will normally enter an interim distribution order, so that your creditors can start getting paid. A date for a conciliation is provided that may be four months later. It is not necessary for you to attend this conciliation. At this meeting, your attorney will normally get your Chapter 13 Plan confirmed on a final basis.

If you are interested in filing for bankruptcy or you simply have some questions about filing, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form. You will be immediately contacted and scheduled for a free consultation.

Previously I spoke of exempting your property so creditors would not be allowed to attach your property. The other requirement is that your monthly net income and monthly living expenses have to be about the same. Otherwords, you can not have much income after expenses left over each month. However, the Bankruptcy Code does allow you to have a little over $100.00 left over each month. There are basically two income tests. The first is the means test. What is looked at is your gross income over the past 6 months. So you need to provide your pay information for the past 6 months prior to the date that you file. The IRS provides various types of deductions that you can take from your gross income to arrive at a monthly disposable income. This income is then annualized and compared to a medium state income for the number of people that live in your household. Where you come down on that scale determines whether you can file a Chapter 7 or Chapter 13 Bankruptcy. The means test looks at your past income. There is another income test and that is Schedule I & J. Here your income moving forward is looked at. Your monthly pay information minus such mandatory deductions as taxes, etc. are used to arrive at your monthly net income. Then your monthly living expenses are deducted from your net income. These can be broader and include more of your actual living expenses than just those allowed on the means test. Again, the two figures need to pretty much offset each other. Income is considered to be about anything derived from any source. However, there are some items that are excluded from these caculations. For instance, social security is not considered in making these calculations. If you are able to pass these tests, then you can file a Chapter 7 Bankruptcy. If not, you will need to file a Chapter 13 Bankruptcy that may have many benefits of its own.

Most people who file bankruptcy own various pieces of property. The types of property can be anywhere from a house to clothes and furniture. The Bankruptcy Code provides a person with a series of exemptions. Exemptions are kind of like shields that allows you to cover up your property. This takes the property off limits from creditors and prohibits them from being able to attach or levy on your property. Exemptions are allowed to be claimed by each individual debtor. That means that a joint filing by husband and wife provides each spouse with a set of exemptions. Both spouses must choose the same type of exemptions. The husband and wife will basically being receiving double exemptions. These exemptions are only up to certain dollar values. However, they are rather generous, so generally no one loses any property.

Pennsylvania provides a person with a choice of exemptions. There are federal exemptions and state exemptions that you can choose from. The federal exemptions are the most generous, so most likely would be the best choice. As an alternative to the federal exemptions, Pennsylvania allows you to select the state exemptions. These state exemptions are rather limited in scope, but on occasion will be the best choice based on your set of circumstances. If you decide to use the state exemptions, then you are also able to use the exemptions provided by federal non-bankruptcy law. The dollar amounts of the federal exemptions are adjusted every three years to take into consideration the changing costs of living. On April 1, 2016, the exemption amounts were last changed.  Currently, the federal bankruptcy exemptions include the following categories:

* Homestead

(This exemption can be applied to any interest in real or personal property that is used as a residence up to $23,675.00.  The amount that needs to be exempted only includes any  remaining value after subtracting for any valid security interests or liens.)

* Motor Vehicle

(This exemption can be applied to an interest in one motor vehicle up to $3,775.00.)

* Household Goods, Household Furnishings, Wearing Apparel, Appliances and Similar Items

(This exemption can be applied to the above mentioned items that are held primarily for personal, family or houshold use of the debtor or the debtor’s dependents up to $600.00 in  value in one item and a total of $12,625.00.)

* Jewelry

(This exemption allows you to exempt up to $1,600.00, as long as held for personal, family or household use of the debtor or a dependent of the debtor.)

* Any Property

( This exemption is oftentimes called the “wild card” and be be applied to any property up to $1,250.00  per debtor, plus up to $11,850.00  of any unused portion of the homestead exemption.)

* Tools of the Trade

(This exemption can be used toward implements, professional books or tools of the trade that belong to the debtor or a dependent of the debtor up to $2,375.00.)

* Unmatured Life Insurance

(This exemption is to be used for policies owned by the debtor that do not have a cash or loan value.)

*Accrued Dividend, Interest, or Loan Value of Life Insurance

(This exemption is to be applied toward policies that have a cash value up to $12,625.00 and insure the life of the debtor or someone to whom the debtor is a dependent.)

*Health Aids

(This exemption is unlimited and may be applied to professionally prescribed health aids for the debtor or a dependent of the debtor.)

* Disability, Retirement and Other Benefits Replacing Wages

(This exemption applies to the debtor’s right to receive in the future social security, unemployment, welfare, disability and illness benefits. A debtor may also exempt alimony and support payments, but only to the extent reasonably necessary for the support of the debtor and any dependents of the debtor. Also, most pensions or other employee benefit plans are exempt to the extent reasonably necessary for the support of the debtor and the debtor’s dependents.  All of these benefits are generally of the type that are already in pay status and are currently being received.)

* Rights to Compensation for Injury or Losses, and Payments for Lost Earnings

(This exemption applies to payments received from various types of injuries or losses. These include 1) crime-victim reparation awards, 2) wrongful death payments of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor,  3) payments on a life insurance contract that insured the life of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, 4) payments on account of personal bodily injury, but not to include pain and suffering, of the debtor or an individual of whom the debtor was a dependent up to $23,675.00 and 5) payments for compensation of loss of future earnings.)

* Pensions and Retirement Accounts

(This exemption applies to retirement funds that are in a fund that are exempt from taxation from the Internal Revenue Code. This would include most pensions, profit sharing, stock bonus plans, employee annuities; individual retirement accounts, deferred compensation plans of state and local government and tax exempt organizations. The value of the debtor’s amount that may be exempted is up to $1,283,025.)

Oftentimes, what exemptions and the amount of those exemptions available to a debtor will determine what type of bankruptcy to file.  If you are able to fully exempt all of your property, then a Chapter7 Bankruptcy would most likely be your best option. If you have significant amounts of property that are not exempt, then a Chapter 13 Bankruptcy would probably be your better choice. In a Chapter 13, the minimum amount that will have to be paid back to unsecured creditors will be the portion of the assets that are unable to be exempted.

The Bankruptcy Code was amended several years ago in the area of exemptions to prevent forum shopping. Otherwords, there was reason to believe that some people might move to another state before filing bankruptcy simply to obtain more generous exemptions. The state exemption law that applies is determined by the state in which the debtor’s domicile has been 730 days immediately prior to the filing. If the debtor’s domicile has not been located in a single state for the 730 day period, then the state exemption law is that of the state in which the debtor was domiciled for the 180 days preceding the 730 day period, or in which the debtor was domiciled for the longer portion of such 180 day period than any other place. This location will then determine what state’s exemptions that you must utilize.  Many states have opted out of the federal exemptions and allow you to only use the exemptions provided by that state. Other states are like Pennsylvania and allow you to choose either the federal exemptions or the state exemptions.

Again, it should be pointed out that very seldom does a person lose any property.  The whole idea behind allowing a debtor to exempt various pieces of property is to obtain a fresh start in life and to fully reap the benefits of the bankruptcy discharge. If you are tired of living in financial stress and would like to obtain a fresh start, then call Attorney Rodney Shepherd today at 412-471-9670.

Some people file for bankruptcy during tax season. The thought is to use their tax fund to help pay for the bankruptcy filing. However, it is important to know just how tax refunds are handled in bankruptcy. The Bankruptcy Code basically views tax refunds twofold:

1) the right to receive a tax refund, which is for a year prior to the filing of the bankruptcy is undoubtedly property of the Bankruptcy Estate and must be exempted to fully protect it; ; or

2) the debtor may have a excessive withholding from his or her wages by their employer for the current tax year. If a refund does result from this withholding, then oftentimes the refund is prorated over the entire year with the prebankruptcy portion being considered property of the Bankruptcy Estate. It would then be necessary to exempt this portion to fully protect it from the reach of creditors.

Most of the time the exemptions are generous enough that the tax refund can be fully exempted. However, in those situations where the debtor is not able to fully exempt it, then it will most likely be expected to be turned over to the Bankruptcy Trustee.

THE FILING OF BANKRUPTCY CREATES AN AUTOMATIC STAY

The filing of a bankruptcy petition brings about the creation of an automatic stay. This stay basically prevents any further action against you by creditors.  It prohibits:

1) any act to collect, assess or recover a claim against the debtor that arose prior to the filing of the bankruptcy petition;

2) the setoff of any debt owing to the debtor that arose prior to the filing of the case against any claim against the debtor; and

3) the commencement or continuation of a proceeding in the United States Tax Court concerning any tax liability by the debtor for a tax year prior to the filing of the bankruptcy petition.

INTERNAL REVENUE SERVICE PROVIDED WITH EXCEPTIONS TO THE AUTOMATIC STAY

Even though the automatic stay prevents most actions, the Bankruptcy Code provides numerous exceptions where the stay does not apply. An exception is granted to the Internal Revenue Service. This exception allows the Internal Revenue Service or other taxing authority to set off a tax refund that existed prior to the bankruptcy filing against a tax debt that also existed prior to the bankruptcy filing. If there is a pending action to determine any tax liability for a period prior to the bankruptcy filing, then the taxing authority may hold the refund until a final determination is made. Clearly any tax refunds for tax years after the bankruptcy filing do not fall within the exception and may not be intercepted or setoff against tax years after the bankruptcy filing.

It is important to note that this exception to the stay only applies to income tax liability and not with respect to any other non-tax liability owed to any other government entity. For instance, any setoff or interception of a tax refund to pay student loans or other debts owed to a government agency is stayed.

DEBTOR MAY UTILIZE AVOIDANCE POWERS GRANTED BY THE BANKRUPTCY CODE

The Bankruptcy Code provides the debtor with certain avoidance powers. Any levies or executions by unsecured creditors that take place within 90 days prior to the filing of the bankruptcy may be avoided. Therefore, any tax refund intercepts made by the Internal Revenue Service for such things as student loans or other government owed debts can be set aside if made within 90 days of filing the bankruptcy petition.

EXPERIENCE COUNTS WHEN SELECTING A BANKRUPTCY ATTORNEY

If you are interested in filing for bankruptcy or simply have any questions, then contact Pittsburgh Bankruptcy Attorney Rodney Shepherd. We may be contacted through our contact information form on our website or by telephone at 412 471-9670. A free consultation will be scheduled to better analyze your situation to put you on the road to financial freedom.

A CERTIFICATE OF CREDIT COUNSELING MUST BE OBTAINED PRIOR TO FILING BANKRUPTCY

The Bankruptcy Code requires a person to obtain a certificate of credit counseling prior to the filing of any bankruptcy petition. This certificate must be obtained within 180 days or 6 months prior to the petition filing date from an approved nonprofit budget and credit counseling agency. The statute actually reads that the briefing must be obtained during the 180 day period ending on the date of the filing of the petition. A more careful reading of the statute actually permits the briefing to be obtained on the date of the filing. This would permit the briefing to be obtained on that date even if the bankruptcy petition was filed earlier in  the day. This would apply to the typical situation where a person had a sheriff sale and filed on the date of the sheriff sale to prevent the sheriff sale from taking place, but did not obtain the counseling briefing until later that day. As a precautionary measure, it most likely would be better to obtain the certificate prior to any bankruptcy filing. This counseling requirment can be fulfilled through a variety of channels. Most agencies can provide counseling online over the Internet or telephone, then there is the in-person briefing that is an option. The local credit counseling agency in the Pittsburgh area is Advantage Credit Counseling located at 2403 Sidney Street, Suite 400, Pittsburgh, PA  15219, which may be contacted at 1 (866) 699-2227. A lot of credit counseling courses initially cost around $50.00, but today you can obtain certificates at very low costs between $10.00 to $20.00. The agency must actually waive its’ fee for any individuals that meet certain income requirements, who are unable to pay. The income threshold is currently if a person’s household income is less than 150% of the poverty guidelines. Depending on the particular circumstances, any briefing can be obtained rather quickly. A typical counseling session last about an hour. During the session the agency will prepare a budget to review the debtor’s income and expenses. The idea behind preparing a budget is to determine whether there are any other reasonable options besides filing bankruptcy that are available to such person. Generally, the agency comes to the conclusion that there are no other options available to such person other than the filing for bankruptcy relief. Therefore, the failure to obtain the required briefing prior to any bankruptcy filing will usually result in the dismissal of the case.

EXCEPTIONS TO THE CREDIT COUNSELING REQUIREMENT THAT MAY PERMIT THE BANKRUPTCY COURT TO WAIVE THE REQUIREMENT 

There are a few exceptions to the credit counseling requirement, which permits the court to waive the requirement. The first is to be incapacitated. The Bankruptcy Code defines incapacity as being so impaired due to a mental illness or mental deficiency as to be unable to realize and make rational decisions regarding financial responsibilities. The second exception is to be considered disabled. Disabled is defined as being so physically impaired as to be unable to participate in an in-person, online or telephone briefing, after a person has made reasonable efforts to do so. In order to fall within the exemption, the debtor needs to prove the following: 1) the debtor is severely physically impaired; 2) the debtor has made a reasonable effort, despite the impairment, to participate in the prepetition credit counseling; and 3) the debtor is unable because of the impairment to participate meaningfully in the prepetition course in an in-person, telephone or Internet briefing. The third exception is to be on active military duty in a combat zone.

BEWARE THAT YOU MUST NOT ONLY COMPLETE THE COURSE BUT SUBSEQUENTLY CONTACT THE COUNSELOR!

A person should be aware of the fact that even though they may have completed counseling over the Internet or an automated telephone recording, the counseling is not deemed to have been completed until the debtor has had some type of live interaction with a counselor, whether that be by telephone, live chat or email following the automated portion of the session. Other words, it will be necessary to contact a counselor after you have finished taking the course.

Upon completing the credit counseling requirement, then the certificate must be filed with the Court. Either the document can be filed at the time the bankruptcy petition is filed or within the following 14 days.

AFTER YOUR BANKRUPTCY HAS BEEN FILED, THE DEBTOR MUST OBTAIN A CERTIFICATION FROM A PERSONAL FINANCIAL MANAGEMENT COURSE

Once a person has obtained a certificate of credit counseling and filed their bankruptcy petition, an additional certification is required during the bankruptcy process. Just like with credit counseling, any debtors filing a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy must complete a personal financial management course also known as a debtor education course from an approved provider. This certification can only be obtained after your bankruptcy petition has been filed and is required in order to receive a discharge.

IN A CHAPTER 7 BANKRUPTCY THE DEBTOR MUST OBTAIN A CERTIFICATE FROM A PERSONAL FINANCIAL MANAGEMENT COURSE WITHIN 60 DAYS OF THE FIRST SCHEDULED MEETING OF CREDITORS

The time period in which to file the certification from the financial management course in a Chapter 7 Bankruptcy case is no more than 60 days after the first date set for the meeting of creditors. It should be noted that the certification has to be obtained from the scheduled date of the first meeting of creditors, as opposed to the date of any rescheduled meeting. The deadline to obtain the certification may be extended by the Court for cause. However, such request for extension must be filed prior to the expiration of the sixty days. If the debtor does not obtain the required certification, then the court will close the case without discharge. This does not mean that your case has been dismissed, but that you will not receive a discharge. In order to receive a discharge this will mean that it will be necessary to file a new bankruptcy.

IN A CHAPTER 13 BANKRUPTCY THE DEBTOR MUST OBTAIN A CERTIFICATE FROM A PERSONAL FINANCIAL MANAGEMENT COURSE PRIOR TO THE DATE THE LAST PAYMENT IS DUE 

A personal financial management certification must also be obtained in a Chapter 13 Bankruptcy. This certification must be obtained no later than the date that the last payment is made pursuant to the Chapter 13 Plan. The debtor can take it earlier during their bankruptcy, but there is not the 60 day requirement like in a Chapter 7 Bankruptcy. This course is primarily designed to assist the debtor in coping with his or her future financial situation by developing a budget.

EXCEPTIONS TO THE REQUIREMENT OF OBTAINING A CERTIFCATE FROM A PERSONAL FINANCIAL MANAGEMENT COURSE

Similar to the credit counseling requirements, there are limited exceptions for debtors that are unable to complete the personal financial course due to a disability or incapacity or who are on active military duty in a combat zone. In order to fall within the exemption or to obtain a waiver with respect to being disabled three items need to be shown: 1) the debtor is severely physically impaired; 2) the debtor has made a reasonable effort, despite the impairment, to participate in the instructional course concerning personal financial management; and 3) the debtor is unable because of the impairment to meaningfully participate in the required instructional course in an in person, telephone or Internet briefing.

Listed below are just a few lower priced agencies.

www.summitfe.org          1 (800) 780 5965

www.AccessBK.org        1 (800) 210-0522

www.ccadvising.com      1 (855) 980-6690

www.beadviser.com        1 (855) 976-1700

www.PreBk.com             1 (844) 599-9689

www.bothcourses.com    1 (855) 313-4527

EXPERIENCE COUNTS WHEN SELECTING A BANKRUPTCY ATTORNEY

Attorney Rodney Shepherd can offer his experience regarding filing bankruptcy and help you through the process. Attorney Shepherd is licensed to practice in all Pennsylvania Courts, including the Supreme Court. He is also a member of the National Association of Consumer Bankruptcy Attorneys. If your are interested in filing bankruptcy or simply have any questions about possibly filing, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our contact information form to schedule a free consultation.

Just about anyone can file a petition in bankruptcy. Any individual who resides, is domiciled or has property or a place of business in the United States can file a Chapter 7 Bankruptcy. It is not even necessary that you be a U.S. citizen. Other words, you do not even have to reside in the United States, as long as you own some type of property in the United States. Corporations and partnerships are also able to file a Chapter 7 Bankruptcy, as they too are considered to be a person or separate entity. However, there are limits to where you can file. You must file in the judicial district in which you reside, are domiciled or have property or a principal place of business for six months prior to the petition being filed or for the longer portion of that six month period. It should be pointed out that you can only file a Chapter 7 Bankruptcy every eight years in order to receive a discharge of most of your debts. Please keep in mind that the eight year period runs from the date that you filed your prior bankruptcy, not the date that you received your discharge. Also, you cannot receive a discharge in a Chapter 7 if you previously received a discharge in a Chapter 13, which was filed within six years of the filing of the Chapter 7 Bankruptcy. Even if the Chapter 13 Bankruptcy discharge was obtained in less than six years, and you paid unsecured creditors at least 70% in your Chapter 13 Plan, then you can still file for Chapter 7 and obtain a discharge. Even though you initially filed a Chapter 7 Bankruptcy, circumstances may arise that determine that converting to a Chapter 13 Bankruptcy is your best option. Such conversion will be allowed, as long as you are eligible for relief under Chapter 13.

A person may file a Chapter 13 Bankruptcy if they are an individual, who resides, is domiciled, or has property or a place of business in the United States. Such individual must have a regular source of income that will allow them to make their Chapter 13 plan payments. A Chapter 13 Bankruptcy can be filed at any time, even if you just recently received a discharge in a Chapter 7 Bankruptcy. However, there are some limitations on your ability to receive a discharge in your Chapter 13. A person who has received a discharge in a Chapter 7 can receive a discharge in a Chapter 13, as long as four years separates the time periods of the filing of the prior Chapter 7 and the filing of the Chapter 13. You cannot receive a discharge in a Chapter 13, if you received a discharge in a previous Chapter 13 that was filed in the past two years. Sometimes a person’s Chapter 13 runs into a series of problems and is facing dismissal. In that case, you can convert your case to a Chapter 7 Bankruptcy, as long as you have not received a discharge in a Chapter 7 that was filed within the past eight years.

Besides the various time limits on filing for bankruptcy and receiving a discharge, you cannot file for any type of bankruptcy relief for at least 180 days, if :

1) your case was dismissed and the court determines that it was due to your willful failure to abide by court orders;

2) you had requested and got your case voluntary dismissed following the filing of a motion for relief from the automatic stay.

Many claimants need help with their Social Security Disability benefits, but are unsure if the cost of hiring a lawyer will outweigh the benefits of approval. While it cannot be denied that the Social Security Administration is more likely to approve an applicant who has representation than one who does not, not all forms of representation are equal.

BENEFITS OF HIRING A SOCIAL SECURITY DISABILITY ATTORNEY

Some applicants will seek out disability advocates for help instead of an attorney in order to save money. However, it is important to know that both attorneys and advocates are legally allowed to collect the same fee amount for representing a claimant in court. In addition, both advocates and attorneys are usually paid after the claim is won using the Social Security Administration’s (SSA) back payments.

With this in mind, there are many additional benefits to hiring a disability lawyer for your case, including:

• Ethics. Attorneys are bound by professional and ethical codes of conduct when they represent a client. If they do not uphold these standards, they can face severe consequences (including loss of the ability to practice law).
• Attorney-client privilege. Anything a client says to his or her attorney is confidential.
• Education. Attorneys must go through rigorous legal education, testing, and training, making them ideally suited to spot potential problems with your claim and find the basis to approve your benefits.
• Qualifications. Attorneys can appeal claims from the initial denial to the federal district court level, something non-legal representatives cannot do.
• Accountability. If you are not satisfied with your attorney’s performance, you can file a complaint against him or her through a legal grievance commission.
• Experience. Attorneys who specialize in Social Security disability law know how to structure a claim from the initial application through appeals and hearings. These lawyers are well-versed in ways to maximize the amount of benefits a claimant receives, including identifying all of a claimant’s injuries, pinpointing the onset date of disability, proving that the claimant’s medical condition meets the requirements of SSA’s listed impairments, and gathering the necessary medical evidence needed to prove the case.

Not only should you seek out an attorney for help with your claim, you should find a legal representative that spends a majority of his or her time on Social Security disability cases. Call the number on this page or fill out our convenient online contact form to make an appointment in our Pittsburgh office.

The ultimate goal of filing a Chapter 7 Bankruptcy is to obtain a discharge. In other words, to obtain a fresh start and to put your financial problems behind you. Bankruptcy is most often used to wipe out unsecured debts, such as medical bills, personal loans, past due utility bills, business debts, charge accounts, collection agency debts, and late fees. However, there are certain debts that can survive bankruptcy, meaning that you will continue to owe the creditor until those debts are paid in full.

YOUR BANKRUPTCY DETERMINES WHICH DEBTS WILL BE DISCHARGED

The discharge that you receive will be effective in eliminating all debts except:

1.  certain taxes; or  (Most taxes are nondischargeable. There are certain exceptions that if the tax is so many years old that it can be discharged. This is rare and even in those situations you must have in fact filed a tax return). 

2.  some debts not listed in the schedules; or  (Sometimes when a person files for bankruptcy they may not have listed a debt, as they either forgot about it or did not even know about it. In a Chapter 7 Bankruptcy, all debts that were not listed are still discharged, as long as the bankruptcy is determined no be a no-asset case. This means that you were able to exempt all of your assets, so the trustee will not be selling any of you property to distribute money to creditors. The thought is that a creditor would not be harmed by not getting notice of your bankruptcy filing since it would not have received anything anyways).

3.  debts from domestic support obligations; or (These debts are defined as obligations for such things as child support, alimony or any other type of debt that would be in the nature of alimony, maintenance or support and are nondischargeable).          

  4.  most fines and penalties owed to governmental units; or  (Debts that have been incurred from any fines, penalties or restitution imposed on a person from a federal, state or local government are nondischargeable).

5.  most student loans; or  (Discharging student loans are more difficult that even discharging taxes. The only exception to discharging a student loan is obtaining a hardship discharge. It is somewhat of an overstatement, but this basically means that you have to be on your death bed. A financial hardship by it self is usually not sufficient).       

6.  debts which were or could have been listed in a prior bankruptcy in which the discharge was denied; or  (If you have had a prior Chapter 7 Bankruptcy case dismissed that was due to some fraud or misconduct on your part, then those debts are not dischargeable in your new case).

7.  debts incurred by driving while intoxicated; or  (Debts that you have incurred by driving while intoxicated whereby you have killed or injured someone are not dischargeable.  Note that only debts incurred from personal injuries are not dischargeable.  Debts for property damage are dischargeable).

8.  debts which have been ruled nondischargeable during the case; or  (Unless the debt falls within one of the listed exceptions, then the debt is dischargeable.  However, if a creditor files an objection to the dischargeabilty of the debt (there are specific grounds that have to be met in order to to do this) and the court has ruled that the debt is nondischargeable, then that particular debt cannot be discharged in your bankruptcy).

9.  debts incurred to pay nondischargeable taxes; or  (Sometimes a person may incur a debt through the use of a credit card or a loan to pay off a tax debt. If the tax debt would have been nondischargeable, then the debt incurred through the use of the credit card or the loan is likewise nondischargeable).

10. marital property settlement agreements; or  (Any debts that are owed to a spouse, former spouse or child and that arose out of a divorce or separation agreement cannot be discharged in a Chapter 7 Bankruptcy).

11. certain condominium, homeowner’s association and cooperative fees; or  (Fees or assessments owed on condominium, homeowners association dues or cooperative fees that become due after your bankruptcy filing cannot be discharged, as long as you or the trustee have an ownership interest in the unit. Any fees that were owed before the bankruptcy filing can be discharged).

12. certain court fees and costs owed by prisoners; or  (People that are prisoners oftentimes file various complaints or motions and incur different types court fees and expenses. Those types of debts are not dischargeable in a Chapter 7 Bankruptcy). 

13.  debts for repayment of loans from pension plans  (If you have taken out a loan from a retirement plan that is qualified under IRS rules, then you are obligated to pay that loan back and cannot discharge that debt in your Chapter 7 Bankruptcy).

• If you would like a free consultation to discuss the best way to procced on your filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412-471-9670 or fill out the  convenient online contact form for a personalized assessment of your case.