FAQs on Filing Bankruptcy from a Philadelphia Bankruptcy Attorney
People always come in and ask questions like, “What does filing bankruptcy do for me?”
“What is personal bankruptcy and can it help me?”
“What are the requirements to file Bankruptcy?”
Below are answers to twenty of the most common questions about bankruptcy answered by a bankruptcy lawyer in Philadelphia.
You do not need your spouse to join together with you to file. In some cases, it makes more sense to file individually and not together even if you are married. Although you can file without a spouse, there is a question on the bankruptcy form about your spouse’s income information which needs to be answered. However, neither your spouse’s name nor his or her social security number will appear on the bankruptcy. You can file bankruptcy chapter 7 or bankruptcy chapter 13 without your spouse.
Many people are totally up to date on all their bills. The problem is that the balance never goes down because of the interest. By the end of the month, you often don’t have enough money to pay for everything that you need. If you pay the minimum payment on the debt each month, it will take many many years to pay off the bill in full. That is the problem caused by interest compounding on your bill, even if you have never missed a payment.
If you don’t have a lot of equity there is no problem. If you have a large amount of equity in your property, you may need to pay back some or all of your bills over a period of three to five years. But even in that situation, there is an exception. In Pennsylvania, if you jointly own a home with a spouse, but the bills are in your name alone, you can protect the house in many cases even if you have hundreds of thousands of dollars in equity.
This done by using the joint exemption as provided for under Pennsylvania law. Furthermore, even if you need to pay back some of the debt, you will often wind up paying back substantially less by filing for bankruptcy protection. Many people who come into our office do not know what to do for their help with their financial condition. For the correct bankruptcy information, Philadelphia residents can come in to see us. Our job is to give anyone considering filing for bankruptcy the correct answers.
If you have too much property, then filing bankruptcy chapter 13 and paying back any nonexempt property over a period of three to five years will protect your property. In addition, if you earn a large amount of money and are able to make payments on your bills, the payment can be combined into one affordable payment without any interest and will in almost all cases be much less than you are currently paying on the debt.
Certain tax debts such as employee withholding taxes are considered trust fund taxes are never dischargeable and will need to be paid back. However, many income tax debts can be dischargeable depending on the age of the debt, if a lien was filed by the taxing authority, and a number of other factors. Contacting experienced Bankruptcy lawyers can show how filing bankruptcy can be used to your advantage when you want to discharge tax debts.
Many individuals and couples are working full-time jobs. The problem is that the debts are outstanding and it is very hard to pay off all the bills. People who are working full time and earning a good salary still have the right to file for bankruptcy relief, just like a person who is unemployed.
You should have a source of regular income. The regular source of income does not have to be a job, social security, unemployment or pension. It can even be your spouse’s income or family member who will help you with your payments. You just need to be able to afford to pay the mortgage again and extra toward what you are in arrears on the mortgage. The more bankruptcy knowledge you have the better off you are.
You can reduce a debt owed on an automobile or other motor vehicles by what is known as a cram-down. That means the debt which you owe to the auto finance company is reduced to the value of the vehicle. For you to be permitted to use this method, the vehicle needs to be at least 910 days (2 and ½ years old) from the time you purchased the vehicle. You can also reduce the interest rate charged by the finance company on the loan, and in some cases substantially reduce the interest rate, like, bringing it down from 21.00 percent to 6.00 percent. These facts regarding reducing your auto loan debt are very important to know when you are considering bankruptcy protection.
Upon filing for bankruptcy, your gas, electricity, water, and other utility bills are reset to a zero balance. If you are facing a utility shutoff, the filing of the bankruptcy prevents the shutoff. The reason for this is utility services are considered necessary services. If a lien on your house has already been filed by the utility, the lien can remain on the property until the house is sold. In a Chapter 13 plan, some liens can be paid back before any other creditors get paid.
By the filing of a Chapter 7 Bankruptcy Petition or Filing of a Chapter 13 Bankruptcy Petition, you will be able to stop a tax foreclosure or Sheriff’s sale on your home. The filing of the case will permit you to repay the amount of taxes that you owe to the taxing authority over a period of three to five years; without losing your ownership interest in the property. By using the Federal and Pennsylvania Bankruptcy laws to your advantage, you have the opportunity to save your home from tax foreclosure.
The only exception is if you are able to pass the undue hardship test. This is a very difficult test to pass, and generally, only people who are totally disabled or people who have no income and no future prospect of having sufficient income to make payments on the student loan will pass the test. People who are employed full time but don’t earn a large income will have a very difficult time passing this test.
The automatic stay which is effective upon the filing of the bankruptcy prohibits bill collectors from calling or contacting you. If the creditor continues to contact you after it has been put on notice of the bankruptcy filing, the creditor can face financial penalties and be sanctioned by the bankruptcy judge, along with you potentially being awarded substantial amounts of money by the Court.
Only bad people file for bankruptcy is an old myth put out by creditors to help them collect money from honest people. The fact is, just about everyone who files for bankruptcy is an honest, good, and hardworking individual or couple. People file bankruptcy because of job loss, illness, inability to get a higher paying job, retirement, death of a loved one, divorce, money mistakes, unexpected expenses, paying high-interest rates, and just not earning enough. No one plans to get into debt. The number of famous people who have filed for bankruptcy is quite long. You should not in the slightest way feel bad at all. You didn’t plan out your situation.
Only people who have too much equity in their home or who own too much property face a potential problem if they file under Chapter 7. In that case, the solution is to file under chapter 13. By filing Chapter 13 bankruptcy you only need to pay back the amount of nonexempt property in your chapter 13 case and at the end of the case, all of your unsecured debts are discharged except for student loans, child support and certain other nondischargeable debt such as criminal fines, etc. If you have too much property to file under Chapter 7 and no income to make payments under Chapter 13 then the best move may be to not file bankruptcy at all at that time.
Some people who have debt problems incorrectly believe that if they transfer a house or other asset into someone else’s name that no one can go after the asset. Intentionally transferring valuable assets out of your name and not getting paid the fair market value can be considered a fraudulent transfer that can be undone by the Bankruptcy Court. In addition, without having transferred the asset, you may have even been able to exempt the property in the bankruptcy case from any creditors. It is very important to have the correct bankruptcy information if you are considering filing bankruptcy.
The bankruptcy code requires equal treatment of creditors in the same category. That means if you have loans from two banks but you also have a credit card with another bank that you don’t want to list, you can’t. You have to disclose all of your debts. There are cases, however, in which you may be able to pay the account that you wanted to keep. Such as by paying back all your creditors, or if the debt is co-signed by someone else. You need to discuss your situation with an experienced bankruptcy attorney who can properly advise you on how to achieve your objectives.
Even if you have $100,000 in credit card debt, but you can only afford to pay $250 per month, you may only have to pay $250 per month for a period of 36 to 60 months. That payment can completely wipe out all of your personal loans, credit cards, and other unsecured debt. In addition, you will not have to worry about a creditor causing you the problem of being required to pay taxes on debt cancellation income after you have filed for bankruptcy protection.
If you have a judgment which has been entered against you because of an accident in which you didn’t have car insurance and someone sued you, filing bankruptcy can protect you from the suspension of your driver’s license. In addition, Traffic Court fines are presently dischargeable in a Chapter 13 case, but not in a Chapter 7 Bankruptcy filing.
You buy a timeshare thinking it is a great deal. Then you realize you have these same monthly payments for the next 15 years. On top of that, you have yearly maintenance fees which cost the same as a hotel or condominium would cost for a week. The timeshare company refuses to take back the timeshare or let you out of the contract. The bankruptcy will allow you to surrender your timeshare back to the company. Having the correct information when filing for bankruptcy will allow you to change your life for the better.
The automatic stay provided by the bankruptcy code requires the vehicle to be returned to you if it was not yet sold at auction. In addition, filing for bankruptcy gives you time to repay your missed payments on the vehicle. You are however required to maintain insurance coverage on the vehicle. By having the correct bankruptcy information, you will understand how to claim bankruptcy to immediately get your vehicle back. In most cases, chapter 11 bankruptcy is not for consumers, as you will find when you ask for information on how to claim bankruptcy.
There is no minimum amount of debt necessary in order to file for protection under the bankruptcy code. However, one needs to look at their situation to determine if filing a bankruptcy is the best move. For example, you owe $5,000.00 which you could pay back in full within the next 4 months. In such a situation bankruptcy would not be the right option, unless, your bank account is frozen or your personal property is scheduled for a sheriff sale.
On the other hand, if you owe $20,000 in debt and you are only paying the minimum payment each month, even though you are current on the bills, bankruptcy may be a very good idea. Many people who come in to file bankruptcy are fully up to date on all of their bills, but the problem is that the bills never seem to go down. The bill looks the same each month even though you are making payments on them.
Other situations in which bankruptcy can be a good idea is a case in which your car has been repossessed. You must get the car back in order to go to work. Even though the car debt is your only debt, bankruptcy can make sense. By filing a Chapter 13 Petition you can prevent the repossession of your car, or get the car returned to you if it has been recently repossessed but not yet sold by the creditor.
If your home is in foreclosure and the mortgage company refuses to work with you and you are not able to get a loan modification, bankruptcy may be a good option. Even though you may have no other debts, the ability to use Chapter 13 Bankruptcy to protect your home will allow you to get up to five years to catch up with the mortgage. This is an important consideration for you when deciding whether to file bankruptcy.
If you want to know what filing bankruptcy will do for your financial situation call us today to get answers to all your questions. The Law Offices of David M. Offen (215) 625-9600
Yes. A Chapter 13 Plan is just that. A plan. Most Chapter 13 Plans filed in Pennsylvania will need to be changed in order to match the number of claims that were filed. At the beginning of a case, it is very difficult to predict the exact amount of priority, secured and unsecured claims that will be filed in your case. A good bankruptcy attorney can have a pretty good idea of the claims that are expected based on what you tell him or her; but, it is very difficult to have an exact amount.
For example, you may be listing that you owe too much in priority taxes and are proposing to pay back more than you owe. Or you may tell your lawyer that you are in arrears on your mortgage by $8,000 when in reality you are back on the mortgage in the amount of $10,000.
To account for the difference your lawyer can file a new Chapter 13 plan which either increases or decreases the number of your payments. If you change the plan before the case is approved by the Bankruptcy Court you are filing what is called an Amended Plan. You do not need the Court’s permission to file an Amended Plan.
If your case has already been approved and you want to change the plan, a Motion to Modify the plan is filed with the Court. Typical examples of cases in which you may want to file for a change in payments after the case is approved include cases in which the mortgage company gives you a loan modification when your new mortgage includes all of the amounts that you are behind on the mortgage.
Another example of a case where you may want to file a Modified Plan is if you were paying off an automobile through the bankruptcy plan and the car is damaged in an accident and no longer drivable. Another situation where filing a Modified Plan is a good option is if your case was filed while you are earning a large income and you have lost the job or source of income and wish to reduce your payments.
The exact circumstances of your case need to be discussed with your attorney because what makes sense for one person’s case may not be the right decision for another person’s case.
Congress made changes to the Bankruptcy Code in 2005 which required that prior to the filing of Chapter 7 or Chapter 13 Consumer Bankruptcy, a person or married couple is required to do pre-filing counseling. This counseling class must be taken by almost everyone with very few exceptions. This counseling session can be done on the telephone or if you prefer it can be done on the computer. There is no requirement that the session is done in person and since 2005 out of thousands of cases I have filed, I have only had one client who said he would like to take an in person class. This session takes 30-45 minutes. After the completion of the pre-filing session, the company will email us the certificate for us to file with your case when the Chapter 7 or Chapter 13 Bankruptcy is filed.
This class is not something to be afraid of, scared of or concerned about. I have never had a client who had a problem with the session and has had thousands of clients take the session between the ages of 21 and 98 years old in order to allow the bankruptcy to be filed without problems.
Some people believe that there is an exception to taking counseling prior to filing if they have an emergency situation such as a Sheriff Sale. The problem is that the Sheriff Sale does not just happen. It was known about long before the day of the sale. Even if a person failed to act until the day before the Sheriff Sale, Credit Counseling can still be done prior to going in and filing for bankruptcy.
Yes. You must list all of your creditors when you file for bankruptcy protection. Many people come into us and say they want to list all their creditors, except one. For example, you have an account with the credit union. They say the credit union has been really good to them so they want to leave the credit union off and not list the credit union in the bankruptcy filing. We answer that you are not free to pick and choose which creditors you want to list and which creditors you want to leave off.
You must list all creditors in the Bankruptcy. This is because all creditors in the same category or class are supposed to be treated in the same manner. By failing to list one of your creditors, you are discriminating against your other creditors since you are trying to play favorites by paying one back and not paying back the others. However, when you file Bankruptcy and once you have received your bankruptcy discharge, you are allowed to voluntarily pay back any debt that you owed. This is permitted even though the creditor is not allowed to sue you or ever attempt to get you to repay the debt.
If you intentionally leave off a creditor the bankruptcy court could potentially hold it against you.
That is why in addition to all the information that we are supplied we always order a credit report for every bankruptcy client that we help. The fact is that most people do not remember everyone to whom they owe money or have a debt.
In general, there is no standard requirement for filing for Bankruptcy. You need to reside in the district where you file but you can also file where you have a business and in certain other circumstances. Most individuals and couples can qualify to file a Bankruptcy but the type of Bankruptcy you are eligible to file will depend on your individual circumstances. We can advise you if bankruptcy is the best solution in your case and if so which type of Bankruptcy would be most beneficial to you.
We look at the types of debt you have, the amount of income you have earned over the last six months and the income you are expected to earn in the future. We also look at the number of assets that you own. This information helps us to determine the type of bankruptcy that should get you the best results in your case.
If you have previously filed a Bankruptcy, there may be certain eligibility requirements but it is definitely possible for you to file for bankruptcy more than one time.
Sorry. The answer is a clear no. If you owe back payments for child support or if you owe money for spousal support or alimony, the fact that you are filing for protection under the bankruptcy code will not allow the debt to be discharged. Congress put this exception into the bankruptcy code with the intent of protecting children for whom child support is owed and needed and for spouses who are relying on funds to be paid to them as a result of a Court ordering support payments.
If you owe back alimony or child support and you are unable to pay it, you have several approaches that you can take. You can go to family court and see what type of payment arrangement the court will allow you to work out to permit you to get caught up on the payments. There is also another option that you can take advantage of which is allowed under the bankruptcy code.
You can file for protection under Chapter 13. By filing a Chapter 13 Bankruptcy you are able to get a period of three to five years to pay back this debt which will be classified as a priority debt which must be repaid in full. The child support debt falls into the same category as any type of debt which is considered nondischargeable such as certain recent income tax debts. Please note that although this method will permit you to pay back any arrears owed under the Chapter 13 plan, you are still required to continue to pay all of your current monthly child support or spousal support payments as those payments become due.
Our experience over the years has been that creditors rarely show up for creditor meetings since they do not usually expect to get a lot out of attending the meeting. They can ask you questions however most of their questions have already been answered in the Bankruptcy Petition which you will be asked to verify is true and correct.
The cases in which we have noticed that creditors show up for the meeting are usually when the debtor is accused of wrongdoing such as taking out a loan and immediately rushing to file for bankruptcy relief a week after taking out the loan.
The Internal Revenue Service has been known to attend meetings in cases where our client has not filed his or her tax returns and the Internal Revenue Service wants to know when the returns will be filed. This only applies to a person who is required to file a meeting since the Meeting will typically not be held if you have not been filing your tax returns.
This is not something to be scared of or frightened of. In fact, we have had clients whom we have told not to worry when attending the hearings – and they have said they were scared and realized afterward that they should have listened to us and not worried at all. Just answer the questions truthfully.