What is an "Asset" in Bankruptcy?

Bankruptcy law often refers to "assets and liabilities". This seems like a simple enough idea, and for the most part it is. However, what qualifies as an asset is much broader than what many people considering bankruptcy would believe.

The simplest definition of "asset" in bankruptcy is anything you own, or have the rights to, that has value (or potential value). This certainly includes your home, rental properties, cars, bank accounts, personal property, and cash. If you can sell it or transfer it, it is probably an asset.

However, the definition of asset goes far beyond these obvious examples. Assets also include contingent and unliquidated property. Contingent property is any property that becomes yours upon the occurrence of a certain condition, such as an inheritance (which becomes yours upon the condition of someone else dying). If you file a bankruptcy, and you are the heir to a deceased person whose estate is being administered, you must list your interest in the property you are to inherent. NOTE: You are not required to list property you stand to inherent if the person granting you the property is still alive. In a Chapter 7, however, you must inform the Court of any property inherited within 180 days of your discharge.

Unliquidated property is property for which the value or amount has not yet been determined. An example of unliquidated property would be a lawsuit in which your damages or award has not yet been determined. Once again, you will need to list this property as an asset.

Assets may also includes intangible property, such as intellectual property (patents, trademarks, copyrights) and franchises. A customer list used by a sales person could be an asset. A tax return, payment, or commission due to a debtor can also be considered an asset, even though the debtor does not yet possess it.

Clearly, the definition of an asset is very broad. All assets will be listed in Schedules A and B of your bankruptcy petition. Your attorney should closely review all of your assets, so they can be disclosed and exempted. If assets are hidden from the Bankruptcy Court, your case could be dismissed with prejudice. Perjury charges could even be filed.

If you have any doubt if something is an asset, disclose it to your attorney so he or she can determine if it must be disclosed to the Court.

What is the Means Test "Look-back" Period

Any consumer bankruptcy filed in Western Pennsylvania will require the filer to complete and submit a "means test" on Form 22A-1 of the bankruptcy petition.

The means test helps determine if the debtor has enough money to repay his or her creditors, and if so, how much. Unfortunately, the means test is quite simplistic. This often leads to inappropriate results that show a filer as having income to repay creditors that does not exist. Your previous 6 months of earnings may not represent your future employment circumstances.

The means test income review has blind look-back period of 6 months. By "blind", I mean it looks back 6 months without any other context and includes any money earned during that period, whether or not the debtor is still making that money, or will continue to make that money. For instance, a one-time bonus or sales commission from 3 months ago will count towards the debtor's income calculation, showing an inflated income that does not exist.

How is the look-back period calculated? Form 22A-1 must include all income earned by the debtor for the 6 months preceding the bankruptcy filing. So, let's assume your bankruptcy is filed on July 15th, 2015. The first month preceding July is obviously June. You then count backwards from June... May, April, March, February, and January.

Therefore, a bankruptcy filed on July 15th, 2016 will consider all income earned from January 1st 2016 through the end of June 2016. This will be your means test "look-back" period. Income earned from July 1st to July 15th (in this example) will not be considered.

Obviously, planning your bankruptcy filing with this look-back period in mind is extremely important. As an experienced Pittsburgh bankruptcy attorney, I can help you consider these means test issues so you can most efficiently file your bankruptcy. It may be beneficial to wait to file. I'll advise patience when it bests suits you.

Conversely, if your income is expected to rise, filing bankruptcy as soon as possible may be advisable. We'll be ready to go if that is the case.

Contact us to set up a free consultation. And have your paystubs ready!

Spring is a Great Time for a Fresh Start

Bankruptcy law is often described as giving filers a "fresh start", and this is true for a lot of reasons. Whether your finances are tied up with credit card debt, a lawsuit, medical bills, or a repossession (to name just a few problems), bankruptcy will help you back on your feet.

The biggest problem for many of my clients is that they cannot get out from under older obligations brought about by temporary unemployment, illness, or other misfortune. These problems lead to lawsuits, penalties, fines, fees, and other costs that can quickly dwarf the underlying obligation. $5,000 in credit card debt accumulated during a spell of unemployment can quickly become $10,000 with interest, court costs, etc. Ongoing interest can make it impossible to ever hope to pay off the debt. Bankruptcy can stop the spiral.

The bankruptcy discharge eliminates a wide range of debt. Credit cards, medical bills, car repossessions, payday loans, and sometimes even taxes can be wiped away. The bankruptcy exemptions allow you to "exempt" your personal property from being used to pay your creditors, so in the VAST majority of bankruptcy cases, you will not lose your home, car, personal possessions, bank accounts, retirement funds... or anything.

Bankruptcy really is a "fresh start", as opposed to "starting at zero". You keep your property and income, and clear out the old debt (and penalties, fines, etc.). Bankruptcy allows you to move forward without the burdens of the past without giving up your possessions. You'll keep your car to go to work, your home to live in, your retirement accounts, and everything else you need to be productive going forward.

Most surprisingly for most of my clients, your creditor score will usually INCREASE. You read that correctly. This is true because your ratio of debt disappears. Old lawsuits also destroy your credit, so eliminating them through bankruptcy improves your credit profile.

Spring is a time for personal growth and fresh starts. Contact us to discuss whether or not bankruptcy is an option for clearing up your financial problems faster than you ever imagined. I am an experienced Pittsburgh bankruptcy attorney who will be happy to review your situation in a free consultation.

Do I Have to Attend the Creditor Lawsuit Filed Against Me?

This is a common question I am asked the first time I speak to a new client. They have been sued by a creditor, usually on an old credit card debt or car repossession, and the paperwork the sheriff has served on them mentions a hearing date and time. Not surprisingly, this is a major concern.

We are conditioned to believe that not showing up to a hearing will have big, important, negative repercussions. In most cases this is true. When you don't show up to a court hearing, the judge will automatically rule against you and/or find you in contempt of court. In almost every situation, it is advisable to appear at a court action you are served with, and in most cases it is advisable to retain a lawyer.

Whether or not you should appear at a creditor lawsuit related to a debt will depend on one question... are you filing a bankruptcy? If the answer is "yes", you will probably NOT appear at the creditor lawsuit held at the Court of Common Pleas or magistrate level. Why is this seemingly negligent course prudent? It's alright not to show up when you are filing a bankruptcy because the bankruptcy will discharge the the underlying debt to the lawsuit. There is no reason to waste your time or pay a costly legal bill and have an attorney appear when the default judgment will be discarded anyways by the Bankruptcy Court. The automatic stay will stop the lawsuit, and the bankruptcy discharge will eliminate the lawsuit. The court will not hold you in contempt, as this is the normal practice.

Now, if for any reason, the debt related to the creditor lawsuit will NOT be included in the bankruptcy, you should be prepared to answer the lawsuit and appear in Court.

Contact us if you have been sued by a creditor on a debt. You should act as quickly as possible, as you only have 30 days to respond to the lawsuit in writing after you have been served, or the Court will cancel the hearing date and rule against you WITHOUT A HEARING. Yes, you read that correctly.

Call my office to speak to an experienced Pittsburgh Bankruptcy Attorney who can explain your rights to you and determine if bankruptcy is an option. It will be possible to file a bankruptcy even after the lawsuit has become a judgment, so it's never too late. You will need to do something about the judgment, because it will be good for 20 years, and may result in the loss of your home, car, bank account, or personal property.

Call sooner, not later...

Property Taxes and Bankruptcy

Property taxes and municipal fees can accumulate rapidly in a few years when a homeowner falls behind. Between the taxes, the interest, and attorney fees, the amount can quickly become unmanageable. Fortunately, Chapter 13 Bankruptcy provides an opportunity to square up with these debts over a 3-to-5 year Chapter 13 Plan.

Not paying property taxes is a serious matter. Municipalities and taxing agencies can, and will, get judgments against the homeowner and the property. Once these court judgments have been obtained, the taxing agency is within their rights to sheriff sale the property out from under you to pay the debt. You can absolutely lose your home over property taxes, and I have seen many clients in this danger. This takes many people by surprise, but it is a real possibility.

Chapter 13 bankruptcy can stop these lawsuits in their tracks, and even stop a sheriff sale. The Bankruptcy "automatic stay" under the Bankruptcy Code effectively stops any lawsuit related to property taxes from proceeding. However, the taxing agency will only be permanently stopped from collecting against your home if they are paid in full, with interest, in the Chapter 13 Plan. (If your Chapter 13 plan fails, they can reinstate the lawsuit).

Once again, paying these property taxes through Chapter 13 bankruptcy can occur over a 3-to-5 year period, during which you will receive Court protection from any property tax lawsuits or collections. This is a major advantage, as you are not required to provide all of the money at once. This is often the only way a debtor would be able to keep their property while facing large property tax obligations.

Interest must also be paid to the taxing agencies. This rate ranges from 10% for many local municipalities, to 12% for Allegheny County (NOTE: rates can vary by county and municipality). The ability to spread out payments over the Chapter 13 bankruptcy plan can certainly make re-payment possible.

Finally, it should be noted that Chapter 13 bankruptcy filers will need to keep their ongoing property taxes current. If current taxes are not paid while catching up property taxes in arrears, the debtor will be left in the same position as before filing.

If you are having difficulty catching up on property taxes, contact us to speak with an experienced Pittsburgh Chapter 13 bankruptcy attorney. The initial consultation is always free, and I will be happy to speak with you at length to determine if Chapter 13 bankruptcy is an option.