What Are Post-Petition Debts?

Filing bankruptcy means dealing with and understanding lots of different types of debt... you'll be told about secure and unsecured debt, dischargeable and non-dischargeable debt, and pre-petition and post-petition debt (just to name a few!). It can get pretty confusing.

The question of what constitutes "post-petition" debt is an important one. In short, post-petition debts are any debts you incur after filing bankruptcy. Post-petition debts are so important because they are generally not dischargeable (there is another type of debt popping up). They don't go away after bankruptcy.

If you open a new credit card account or take out a new car loan after filing bankruptcy, the bankruptcy does not eliminate that debt, even if you wish to return the property. If you borrow from a friend or family member, or get medical treatment after filing, you will probably be facing a post-petition debt. These post-petition creditors will be free to sue you after the bankruptcy automatic stay ends at the discharge of your case.

Beyond these obvious examples, there are some ongoing debts that may be considered post-petition debts. Utilities, phone and cable bills, and taxes will all be due after filing bankruptcy, even if the amount you owed before filing (PRE-petition debt) is discharged. Taxes will be due as always, so make sure you are prepared to pay them.

Your car and mortgage payments will continue after bankruptcy, assuming you wish to retain the property. In a Chapter 7 bankruptcy, the payment must be made as normal or the property can be repossessed or foreclosed upon. You must be current on these payments at the time of filing bankruptcy. In Chapter 13 bankruptcy, the payments will be made through the bankruptcy plan.

It is important to point out that debts accrued during your Chapter 13 bankruptcy plan (which lasts 3 to 5 years) are NOT discharged, even though you are technically "in bankruptcy". Once again, only the debts from before the date of filing are discharged. Not only will post-petition debts survive your Chapter 13 bankruptcy, you must also get Bankruptcy Court permission to take on certain post-petition obligations, such as a new car payment.

If you have any question about what constitutes a post-petition debt, be sure to clarify it with your attorney before filing.

Car Accidents and Bankruptcy, Part I

The most frequent type of lawsuit involved in a bankruptcy filing is a credit card lawsuit, filed after a credit card has gone into default.

As discussed elsewhere on this website, these lawsuits are normally discharged through bankruptcy, and any related liens are avoided and removed. But, these are not the only types of lawsuits involved in bankruptcy.

Lawsuits stemming from auto accidents are another issue handled in bankruptcy. They are more complicated for several reasons to be discussed. Whether or not these lawsuits are dischargeable through bankruptcy will be a major issue, and if the lawsuit is the primary debt of the potential filer, dischargeability may determine whether or not the bankruptcy is filed at all.

These auto accident lawsuits will normally be filed by an insurance company against a debtor, often when the debtor had no insurance at the time of the accident. The claims may be quite large, especially if there was bodily injury. Lawsuits can exceeding $50,000, $60,000, even $100,000. This makes it especially important to determine if the Chapter 7 or Chapter 13 bankruptcy discharge is available as an option.

The major questions in determining if damages related to an auto accident are dischargeable are:

• Was the debtor under the influence of drugs and alcohol during the accident?
• Was there bodily injury, or just property damage?
• Were the actions of the debtor willful or malicious?

I'll discuss each question in turn in my next post. In short, if you were under the influence of drugs and alcohol at the time of the accident and you caused bodily injury to someone else, the debt will NOT be dischargeable (though mere PROPERTY damage while intoxicated may be dischargeable). Secondly, if the act causing damage or bodily injury was willful or malicious (intentional) the damages will NOT be dischargeable. The three questions are intertwined and must be reviewed by your bankruptcy attorney in relation to each other.

Nonetheless, there will leave many situations in which the lawsuit can be discharged. 

I'll discuss these issues in much more detail in my next post.

Paying for Bankruptcy

It's a common and reasonable question, "How do I pay for my bankruptcy?"

In a Chapter 13 bankruptcy, the bulk of the legal fees and court costs are paid through the Chapter 13 plan. Generally, some money is paid up front to cover the court filings and initial work needed to file the bankruptcy petition. The remainder of the fees and costs will be paid to your bankruptcy attorney over the course of the 3 to 5 year plan, through the plan itself.

If attorney fees in a Chapter 13 bankruptcy go beyond the normal  amount anticipated, your attorney may file a "fee petition" to collect additional fees. However, the good news is that these fees are also paid through the Chapter 13 bankruptcy plan. None of the extra attorney fees will come out of your pocket directly; in fact, money formerly directed to your unsecured creditors may be used to pay your attorney fees at this point.

It should be noted, a fee petition will never occur without your knowledge or approval. A fee petition must be approved by the court and served on you before it will be approved. You will always have a clear, exact idea of what your attorney fees are when you retain my office.

Paying for a Chapter 7 bankruptcy can sometimes be trickier. Chapter 7 bankruptcy involves lower income filers, so money is often tighter. Knowing this, my office strives to offer flexible payment plans. I know that sometimes it will take weeks to pay me, sometimes months. An important part of my job is making it work. Whether the payments are large or small, my office will provide the same exceptional service and care.

Payments can also be made by third parties, such as parents, friends, and siblings. Gifts such as these are permitted to help debtors file bankruptcy. Tax returns can also be used, and this is important to keep in mind early in the calendar year. If you are anticipating a large tax return, use it to clear out your old debts! We can figure out a way to work with your current budget and financial situation.

Considering that bankruptcy can save tens-of-thousands of dollars, the fees involved shouldn't be viewed as something that cannot be overcome. Contact us for a free consultation and we can discuss your best way to pay for bankruptcy.

Credit Card Lawsuits, Part III: Should I Respond?

Briefly reviewing what I have discussed earlier regarding credit card lawsuits...

You have been served with a credit card lawsuit by the sheriff. From that day, you have 20 days to respond, and the court will automatically grant you 10 more days when those 20 days expire. Your response needs to be a formal answer to the complaint filed in the relevant court. The answer must exert a defense and be in the proper form.

All of this raises the next important question... should you actually respond?

Just because you can respond doesn't mean that you should go through the time and effort, or pay an attorney to do so.

If the debt is not your debt, or if it was procured without your knowledge through fraud, you most certainly should respond. A consumer protection attorney should have no problem getting the complaint dismissed. Failing to respond could lead to a judgment being entered against you despite your innocence. A judgment could destroy your credit.

If you have not made a payment on the underlying debt or used the credit in question in 4 or more years, you should consult and an experienced lawyer to see if you can raise a statue of limitation defense (NOTE: this is an affirmative defense, meaning you must respond to the complaint and raise the defense or you will lose!). You may also want to respond if you suspect the creditor no longer possesses the original documentation for the loan, or if it was not transferred properly. These provide effective defenses to the complaint filed against you, and give a good shot at succeeding in court. It will be worth your money to hire an attorney.

However, if none of these circumstances apply, and you suspect the underlying debt is valid, you may decide to NOT respond. Not responding to a legal action is normally not a very good idea. But, it may not be necessary if you are filing (or preparing to file) a bankruptcy.

The bankruptcy automatic stay will stop any credit card lawsuit in its tracks. Filing a bankruptcy prevents creditors from filing a suit against you, proceeding with a suit already filed, or executing on a suit that has already become a judgment. So, if responding to the complaint is not possible, or feasible, or likely to succeed, you should be considering filing bankruptcy to enjoy the protections it offers.

Finally, an experienced consumer protection or bankruptcy attorney may be able to help you negotiate a settlement to stop the lawsuit from proceeding. A settlement agreement will stop the creditor from proceeding with the lawsuit as long as you are paying on the debt. Both options of bankruptcy and debt settlement will be discussed in a later post.

Whether or not to respond to a credit card lawsuit hinges on a couple factors discussed above... whether you have a reasonable chance to succeed, and whether bankruptcy or a negotiated settlement are legitimate options. Contact us and speak to an experienced Pittsburgh bankruptcy lawyer to learn your options and defend your rights.

I'll next discuss what happens when you do not respond to a credit card lawsuit and a default judgment is entered against you.

The Timeline on a Chapter 7 Bankruptcy

My Pittsburgh bankruptcy clients are often very interested in knowing the normal timeline in a Chapter 7 bankruptcy, and understandably so. The process often determines when they can go on with life as normal.

The timeline begins when the bankruptcy is filed. However, the bankruptcy cannot be filed until several important steps are completed.

First, the petition must be completed and electronically filed. As your attorney, I will need to list all of your assets and liabilities, complete all of the schedules and the means test, submit your income and expenses, and disclose other bankruptcy relevant material. I will also need the information required by the court and the trustees, including paystubs, tax returns, proof of retirement and insurance accounts, and all income and asset information about a debtor-owned business.

Once all of this information is provided, I will also need time to organize it and include it in your bankruptcy petition. The faster you provide it, the faster the timeline starts.

Second, the debtor will need to complete an approved credit counseling course. This can be ordered at my office, and completed over the phone or the internet. It normally takes between 1 to 2 hours to complete. The bankruptcy petition cannot be filed until 24 hours after the course is completed.

Third, I will need to be paid in full before I can file. I will be happy to set up a payment plan, and very often do so for clients. However, if I am not paid in full, my legal fees could be discharged in the bankruptcy (not a business model that works very well to keep me in business!). But, payment plans often work out fine for clients. I time the last payment to coincide with completing the bankruptcy petition, so I am able to file as soon as possible.

Once the bankruptcy is actually filed, you will receive a case number, and roughly 6-to-8 weeks later, you will be notified by the court of a Meeting of Creditors date (the details of which are discussed elsewhere on this blog in greater detail). This will be the only official appearance you will be required to make. This appearance is mandatory, but it is not something that should cause stress or consternation. 

You will also be required to complete a second course online or over the phone. This is known as a financial management course. Once again, it is easy to do, and it takes 1 to 2 hours. You have until 60 days after the first scheduled meeting of creditors to complete the course, and it can be completed any time after your case is filed. (NOTE: if you don't complete it on time, your case will be dismissed... so get it done!)

After the meeting of creditors is completed, your case will remain open for 60 days, giving your creditors or the United States Trustee the opportunity to object to the discharge. This occurs very rarely. However, during this time, your Chapter 7 bankruptcy technically remains open. You should not use any credit during this time, take out any loans, or transfer any property. Your attorney will advise you in great detail as to what you should and shouldn't do during this time.

When the 60 day period ends, your Chapter 7 bankruptcy will officially be discharged. The bankruptcy Court will mail you a notice of discharge, which you should keep for your records. At this point, you can take any financial action that you like. The Chapter 7 bankruptcy timeline comes to a close.

In summary, once your Chapter 7 bankruptcy is prepared and filed it will normally be about 3 1/2 months before your case is officially discharged, but as little as 6 weeks until everything you are required to do is completed. Contact us today to set up a free consultation and see if you qualify for a Chapter 7 bankruptcy.