Reviewing Your Credit Report for Bankruptcy

The primary reason to file a bankruptcy is to eliminate, or at least restructure, your debts. The best way to find out about these debts in detail is to run a three-source credit report (which I can do in my office). So, it follows that you need to review your credit report closely to make sure it includes all of your debts (which you want to discharge).

A good credit report contains a wealth of information about your credit and finances. It will list creditors, creditor addresses, amounts owed, and debt limits. It will include old debts, debts closed out, and debts transferred. It will include information about your mortgage and your car payment. And, of course, it will include the number that Americans often obsess over... their credit score.

So, what to make of it all? If you are applying for a mortgage or a loan, you should focus on the credit score. It is determined by an algorithm meant to determine your credit-worthiness. Credit score is best left for discussion in another post. My focus today is reviewing your credit score for bankruptcy purposes.

The most important information, from a bankruptcy perspective, on your credit report is the creditor addresses. These address help your attorney serve the proper creditor departments so that your bankruptcy is recognized. The address on most correspondence with creditors is often just a correspondence or collections address. A good credit report includes addresses for legal and bankruptcy departments. This helps assure that your bankruptcy is properly processed by your creditor.

The amount owed is also important information on your credit report, especially when filing a Chapter 13 bankruptcy reorganization. This information helps your attorney estimate how much a repayment will be. The amount my clients believe they owe is often much less than the amount listed on the credit score, as they often do not take interest and penalties into account.

What to look for beyond the addresses and amounts? Medical bills.

Medical bills are often NOT reported to the credit agencies, and therefore do not show up on your credit report. You will want to review the report closely, and if these bills do not appear, gather up statements showing how much you owe towards these medical debts so that your attorney can include them in your petition. Remember... if they're not included, they're not discharged. It's especially worth tracking down these medical bills (all of them) in a Chapter 7. I have seen clients literally finds thousands of dollars in medical bills when I insisted they keep looking. It's worth the time, because if you do not include them, they can attempt to collect after the bankruptcy is discharged.

Also, you will need to inform your attorney of any personal debts, or debts owed to anyone that isn't a finance company, such as attorney fees. These debts will obviously not show up on a credit report. When in doubt... find the bill!

In review... read your credit report by focusing to make sure you have listed all of your creditors, especially medical bills. Second, make sure the amounts look correct, but don't worry too much about this, as your creditors will need to file exact claims if they wish to collect from you anyways.

Review that credit report closely! Make sure everyone is included!

Stopping a Sheriff Sale with Chapter 13 Bankruptcy

The culmination of the foreclosure process is the sheriff's sale. It is the final step where your home is literally taken from you and sold to a third-party. The very idea is terrifying to contemplate...someone else taking possession of your home. Fortunately, right up to the moment the sale occurs, Chapter 13 bankruptcy can be used to save your home.

How does Chapter 13 bankruptcy fix this dire situation? The Bankruptcy Code "automatic stay" stops the sheriff sale from proceeding. The automatic stay prevents creditors from taking any legal action (or continuing any legal action) against a debtor. Once the actual sheriff sale takes place, it is too late. The automatic stay only stops sheriff sales that have not yet happened. But, if a Notice of Bankruptcy is properly forwards to the sheriff's office before the sale occurs, it should be stopped. (NOTE: It is important to not wait until the last moment, as the complicated requirements of Chapter 13 bankruptcy and the need to serve the sheriff may make last second filings impossible.)

But, the automatic stay alone does not save your home from sheriff sale. If you cannot submit a feasible Chapter 13 bankruptcy plan, your case will be dismissed, and the sheriff sale will again go forward. In order for your Chapter 13 plan to be considered feasible, you will need to show enough income to catch up on all of the arrears, legal fees, interest, and penalties, as well as show you will be able to make the payment going forward.

Chapter 13 bankruptcy is often a great option for individuals who lost their job or source of income for a period of time, subsequently fell behind on their mortgage, but are now at full income once again. Chapter 13 bankruptcy will allow all of the arrears, fees, and penalties to be cured (without interest) over a 3-to-5 year plan. No interest is an important key. If you are $6,000 behind on your mortgage, you can catch up on the arrears for roughly $100 per month over 5 years.

Now, penalties and fees may increase the amount owed, but they too are paid without interest. In any case, Chapter 13 bankruptcy allows many individuals to keep their homes long after they stopped believing it was possible.

An important side note about attorney fees for the banks and mortgage companies.... they are allowed by law to add-on additional fees after a sheriff has been actually scheduled. So, if possible, you will want to contact us before the sheriff sale is scheduled, to avoid as much in the way of fees as possible.

I am an experienced Pittsburgh bankruptcy attorney who would be happy to speak with you during a free consultation to discuss whether saving your home through Chapter 13 bankruptcy is an option. Don't wait until it is too late, call today to save your home.

What To Do If You Need To Wait On Filing Bankruptcy

There will sometimes be occasions when filing a bankruptcy is not possible at the moment. Whether it be due to a means test timing issue, the need to make payments on legal and filing fees, or an exemption issue, sometimes waiting to file is preferable or even necessary.

What should you do in the meantime?

The first question should be, "Is there a lawsuit against me?" If the answer is "yes", you will need to plan accordingly. A lawsuit that has become a judgment will allow the creditor to put a lien on your bank account, home, or vehicle. A lien on your bank account can happen without your knowledge, so the first thing you will probably want to do it stop automatic deposits into your bank account and severely limit the money you hold.

Speak directly with your attorney about planning for the possibility of a bank account lien, it is very important. Marital accounts will be protected against the lien of a creditor of only one spouse, but once again, make sure to discuss this possibility with your attorney. Stopping direct deposit and operating day-to-day without a bank account may be a huge hassle and generally annoying, but losing a paycheck or two in a frozen bank account is worse, especially considering it is an avoidable problem. Discuss the issue with your bankruptcy attorney.

Also, keep your attorney informed if you are served with any additional paperwork related to a lien being place on your home or car. This is a call you should make on the same day. A lien on a home or car may require moving up the filing date or your bankruptcy so that the automatic stay can be used to protect your property.

While waiting to file bankruptcy, you should also avoid taking out any new loans (car payments, home equity loans, personal loans, credit cards, etc.) The bankruptcy court will closely scrutinize your financial activity for YEARS before filing, so make sure you discuss any large financial plans with your attorney. Avoid large purchases and cash advances, especially as you move closer to your anticipated filing date.

Finally, you should also avoid transferring property or the title of property in the time you are waiting to file bankruptcy. Once again, the Court will closely scrutinize your financial activity. Transferring the title of property gives the impression you are try to avoid paying your debts and may even make it appear you are trying to defraud the bankruptcy court. In most cases, these transfers will serve no purpose other than preventing you from filing a bankruptcy... you can usually exempt and protect your property without transferring it.

In the time between retain your attorney and actually filing, which may be several months or longer, make sure you stay in touch with your bankruptcy attorney about your financial activity. An experienced bankruptcy attorney can help you protect your assets and avoid pitfalls that can undo a filing. Proper planning is essential. Make sure you don't sabotage your bankruptcy filing or lose assets because you didn't take the proper precautions.

The Hierarchy of Debt (Who to Repay First)

When your bills are mounting and you have limited income, but you are not quite ready to file either a Chapter 7 or Chapter 13 bankruptcy, you need to prioritize who does (and DOESN'T) get paid. While each actual situation is obviously different (contact us to set up a free consultation to discuss your debt issues), here is a short-hand collection of ideas to determine who to pay:

• Pay your mortgage first. Failing to pay your mortgage could lead to foreclosure proceedings within several months of non-payment. If you want to keep your home in a Chapter 7 bankruptcy, you will need to be current at the time of filing. I have seen clients who paid credit cards before paying their mortgage... and they almost lost their homes because of it. It is a potentially terrible mistake. I'll later explain why credit cards should be one of your LAST payments, but for now it is important to stress that your home should be your primary concern (assuming you want to keep it) because it is your most difficult asset to replace, and losing it could lead to the displacement of your family. (NOTE: if a foreclosure proceeding has begun, contact us immediately)
• Pay your car payment second: Paying your car payment is important for all the reasons that paying your home is important, only to a lesser degree. It is a difficult asset to replace, and you will probably need it to go to work, pick up your kids, get around town, etc. (NOTE: If your home or car are in arrears, it is possible to catch up in a Chapter 13 bankruptcy). Several months of non-payment could lead to repossession proceedings. Don't let it get that far, if possible.
• Pay utilities third: If you are facing a shutoff notice, you should immediately pay the utility and strongly consider filing a bankruptcy. Cable and internet can be cancelled on a tight budget, but losing your electric, gas, or water is not an option. Utility debt can be eliminated in bankruptcy, and utility providers cannot discriminate against you afterwards by not providing service.
• Pay your taxes, especially if the IRS is likely to soon garnish your wages. If not, paying the IRS could be put off, but not for too long. Tax debt is unsecured, but priority, which means it is not discharged in bankruptcy.
• Last (and least), pay credit cards, student loans,medical bills,  and other unsecured debts. Credit cards especially should not be a priority, as they are unsecured debts that can be eliminated at any time under bankruptcy. As mentioned above, do NOT prioritize credit cards over your mortgage... their collection calls may be annoying, but they are preferable to potentially losing your home. Student loans can eventually lead to garnishments, but usually in the short-term they can be deferred. Medical bills can also be paid near the bottom of your list. It should be stressed that these debts are important, but they are just not as urgent as those listed above.

Once again, each situation is unique. If you are struggling to pay most of your debt and ongoing expenses, it is probably time to consider a bankruptcy. But, until you make that decision, it is worth considering this hierarchy to buy yourself time. Credit cards, medical bills, and student loans cannot be ignored forever, and failure to pay on them can lead to lawsuits, but in the meantime make sure not to lose your home, your car, or utility service.

I will be happy to discuss the impact of each type of debt you face.

Getting Your Repossessed Vehicle Back In Bankruptcy

If your car has been repossessed, and you want to retain it, it is not necessarily too late in Chapter 13 bankruptcy. However, you won't want to wait too long to file, as you can only recover the vehicle if it has not been auctioned off.

When your car is repossessed, you can file a Chapter 13 bankruptcy to catch up all the arrears on the vehicle. The arrears will be paid at 0% interest, which will make the repayment significantly easier. However, you will be required to pay any fees and costs related to the repossession. The finance company will be compelled to return the vehicle to you if you file in time. As mentioned above, you won't want to wait too long, as the vehicle will be lost if it is actually auctioned before filing. Chapter 13 bankruptcy is a great way to keep the vehicle in these situations.

A repossessed vehicle cannot be retained in Chapter 7 bankruptcy, unless you can pay all of the arrears on the vehicle at the time of filing. Chapter 7 bankruptcy works differently than Chapter 13 bankruptcy... while it has many advantages, the ability to catch up on arrears on a vehicle is not one. In most Chapter 7 bankruptcies where a vehicle has been repossessed, it is surrendered though the bankruptcy, with the debtor's obligation and liability being wiped out. If you can't afford to retain the vehicle (or don't want to) Chapter 7 bankruptcy is the way to go.

Contact us to set up a free consultation to determine if it feasible to file a Chapter 13 bankruptcy to save you repossessed vehicle (or whether it is best to walk away in a Chapter 7 bankruptcy). I have helped numerous clients in this situation, and I will be more than happy to discuss it with you.