Spring Is A Time For Fresh Starts

Bankruptcy is often described as a "fresh start", and this is true for a lot of reasons. With Spring (mercifully) on the way, here are a few ways bankruptcy can be a fresh start for you.

• Clear out lawsuits: Filing bankruptcy allows you to remove lawsuits and judgments from your financial record. A creditor judgment can stay on your record for 20+ years, putting your home, car, bank accounts, and personal property at risk, while at the same time destroying your credit. Filing bankruptcy can eliminate these lawsuits, protecting your property and allowing you to rebuild your credit in one swift stroke.
• Reset your debt ratio: High debt ratios can severely limit your ability to get credit in the future while keeping your credit score low in the present. Bankruptcy can wipe out your unsecured debt and give you a fresh start with re-establishing your credit.
• Catch up arrears on a car or home: Have you fallen behind on a car or mortgage payment due to a temporary loss of employment? A Chapter 13 bankruptcy can allow you to catch up while paying 0% interest on your arrears. Don't let your home slip towards foreclosure or your car end up repossessed. Act now with a Chapter 13 reorganization before it is too late!
• Stop creditor calls: Tired of creditors pestering you and harassing you at all hours of the day and night? Bankruptcy can stop the calls immediately with the Automatic Stay, which prevents any creditor contact with you. Bankruptcy can give you piece of mind and stop creditors in their tracks.

Spring is a time for renewal and fresh starts, so what better time to put your finances back in order? Contact us and schedule a free consultation to see if you qualify for the bankruptcy fresh start.

Joint Debts In Bankruptcy, Part 1

A common concern for new clients is understanding how their joint debts will be treated in Chapter 7 bankruptcy and Chapter 13 bankruptcy. This will often be a determining factor in whether or not they will even file, so it is worth taking a little time to discuss over my next two posts.

Most joint debts are "jointly and severably liable". This means if you and another person both sign on a loan that defaults, the creditor is allowed to go after one of you, both or you, or neither of you (not often!) for the full amount. The creditor is not limited to only going after half of the debt from both debtors. The creditor can collect 90% from one, 10% from the other, or any other combination.

This can be very important in situations where the joint debtors have large differences in income and assets, or are not on good terms. When there is a large difference in income and assets, the creditor is permitted to go after the assets of the wealthy signer on the loan, even if they hardly benefited from the credit. Unfair as this seems, this is entirely legal. I have had many clients co-sign on loans for their children or spouses get sued on those debts despite never enjoying any of its benefits. If you think about it, most cases with joint debtors will be unbalanced for this reason. The whole reason for applying for joint debt is that one individual has much better credit than the other.

Joint debts are also a big issue when the debtors are not getting along. This is frequently the case in divorces, where joint debts must be negotiated as part of the marital property settlement. In some cases, a joint debt you have agreed to assume through a marital property settlement will NOT be discharged in bankruptcy. I'll elaborate on this situation in my next post, but you will want to speak to an experienced Pittsburgh bankruptcy attorney to account for this situation. Regardless, when joint debts go bad, the debtors are often not willing to cooperate on dealing with the consequences.

Joint debts come in many forms. Credit cards are the most common. Cars and mortgages are also common situations. An individual wanting and needing a car will often not have the credit to finance one. This is when a parent or spouse will co-sign on the loan. "Co-signing" makes this parent or spouse jointly and severably liable. So, if further down the road, the car is repossessed, the creditor can go entirely after the co-debtor who never even used the car, but was only trying to be helpful, for the deficiency. This is actually a quite common issue.

These joint debts can be eliminated through bankruptcy. Unfortunately, there are not many legal alternatives to otherwise avoiding a joint debt, unless you can prove your co-debtor committed fraud.

The important thing to understand is that if you are a joint debtor on the loan, you are as much on the hook as your co-debtor, even if you only co-signed to be helpful. In my next post, I'll talk about how joint debts are treated in bankruptcy, which is sometimes the only way to deal with them when they have gone bad.

Contact us with any questions about your joint debt! 

How Long Does It Take To File Bankruptcy

Prospective clients often ask me, "how long does it take to file a bankruptcy?" It's a reasonable question, but impossible to answer definitively because it involves numerous factors. I will often respond to the question by asking a question of my own, "how long will it take for you to get me everything I need?"

The first factor is collecting all of the necessary paperwork and documentation. At a minimum, my clients must get me the following information:

• 6 months of paystubs
• 2 years of tax returns and W2s
• Retirement account information
• Lawsuit information
• Information about your home, such as amount owed on the mortgage, tax status, and appraised values
• a monthly budget
• bills and debts not listed in the credit report.

This information is all necessary to file a bankruptcy, and must be provided, compiled, and organized in your bankruptcy petition. Sometimes tax transcripts or appraisals must be ordered. Sometimes it is difficult to compile paystubs. In any case, it often takes awhile to collect everything.

Next, all bankruptcy filers must complete a pre-bankruptcy credit counseling course. This course can be completed over the phone or internet (you don't need to leave your living room) and only takes an hour or two to complete. But, I cannot file until it is completed, even if all of the above-mention paperwork is available. Clients are sometimes slow to complete this course, and it will always hold up the bankruptcy filing.

Finally, I need to be paid before I can file. I have many clients paying through flexible payment plans, however, the case cannot be filed before the final payment (otherwise, the legal fees are discharged with the rest of the debt). I never pressure my clients for payment, I know they want to file their case more badly than I want to get paid. If it takes awhile, then it takes awhile... I'm not going anywhere.

So, how long does it take to file a bankruptcy? I have some clients who are very prepared, ready to do the classes, and able to pay the costs and fees who file only days after meeting me. Some clients, on the other hand, are on payment plans that range over a year. The answer to the question usually somewhere in between. In depends on circumstance.

Regardless of whether it will take a day or a year, I represent my clients with the same vigor. Contact us to set up a free consultation and see if you qualify for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Given you situation, I will be happy to estimate how long the process will take for you.

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!