Does Bankruptcy Affect My Utilities?

Debts owed to utilities are dischargeable through bankruptcy. This is good news for anyone facing large, past-due bills for gas, electric, cable, or cell phones. However, many of my clients considering bankruptcy are concerned that including a utility in the bankruptcy will result in the service being denied in the future.

Fortunately, the bankruptcy code prohibits a utility from denying service to bankruptcy filers. Not that they would probably even want to... most bankruptcy filers get current and stay current after filing. The utilities would be denying good customers.

However, the bankruptcy code does allow utilities to require a security deposit after filing. Most utilities in western Pennsylvania do not bother with this requirement. The lone exception is Duquesne Light. Duquesne Light will normally close out your account when a bankruptcy is filed, whether or not you have a past-due account. They will require a security deposit (sometimes rather large) for service to continue. I let my clients know beforehand so they can plan accordingly. Once again, no other utilities in western Pennsylvania require this at this time.

If you are current with your cable, cell phone, gas, or water, you can continue making payments as normal, and your service will not be affected. If you are facing a shutoff, the bankruptcy automatic stay will stop the shutoff, so sometimes it is important to act quickly.

It is always worth checking before filing a bankruptcy to see if you have older bills, especially with cell phone or cable companies. Old cell phones bills from college or earlier sometimes linger. Cable bills and expenses are sometimes forgotten after several moves, as it is easy to forget to end the service or return equipment.

Contact us to discuss your options if you have issues with old utility bills or you are facing a shutoff.

Don't Transfer Property Before Filing Bankruptcy!

A big mistake people can make before filing bankruptcy is to transfer property to a friend or relative for less than full value before a bankruptcy. This could potentially be viewed as a fraudulent transfer. If you are considering filing a bankruptcy, make sure not to transfer property before speaking with a bankruptcy attorney.

Why is this an issue? Bankruptcy law allows you to exempt or protect personal property when filing. The purpose of the bankruptcy exemptions is to allow a true fresh start by permitting the debtor to keep property necessary to make a living and get back on their feet. However, these exemptions are not unlimited. While the exemptions are sufficient to protect the value of most debtor property, sometimes they do not protect everything.

This is potentially a problem for debtors who own their home outright or owe very little. This is more often the case with older clients who have been paying down their home for decades. Individual debtors may only protect $23,675.00 in equity in their home (joint debtors up to $47,350.00). If your home exceeds these limits, you would need to repay money through a Chapter 13 bankruptcy, and Chapter 7 bankruptcy will no longer be an option.

Some individuals think a way around this is to transfer the property to a friend or family member before filing. The Bankruptcy Court will not allow this. In fact, if you filed a bankruptcy after such a transfer, the Court can actually un-do the transaction. Most Trustees will ask if you have transferred property in the last 4 years before filing, and you are required to answer truthfully under the penalty of perjury. Trustees may also do property searches and look back even further. The bankruptcy petition specifically asks if you have transferred property into a self-settled trust in the last 10 years. In any case, you do not want to attempt to hide such a transfer.

It's safest to avoid all transfers of property in the months (and even years) leading up to a bankruptcy, even small, innocuous transfers. If you have transferred property, it may be transferred back before filing. Or, a Chapter 13 bankruptcy can be filed on the property as if it had never been handed over in the first place. When in doubt, hold on to the property until speaking with a bankruptcy attorney. There are options if property has been transferred, but it could make things difficult.

Contact us to set up a free consultation and discuss how to properly protect your property..

Labor Day

Labor Day may be the unofficial end to summer, but with temperatures pushing into the 80s, it sure doesn't feel that way. It's a great day to relax and forget the purpose of the day (work!).

As a bankruptcy attorney, people often ask me how many of my clients work. The answer? Virtually all of them! Bankruptcy is an option to help hardworking people more than anyone else. Hardworking people have things to lose, and people to protect, and the bankruptcy process will guard both.

The vast majority of my clients are hardworking people who hit one or two common hardships. The most common is medical bills. This country doesn't do a great job of providing reliable health care for working class citizens, and one or two major medical situations with sub-standard health coverage can push anyone into bankruptcy. Fortunately, medical bills are dischargeable in both Chapter 7 and Chapter 13 bankruptcy. With medical bills often reaching in the tens-of-thousands of dollars or more, bankruptcy is often the only option. Otherwise, these bills will stop you from moving on with your life.

Temporary job loss can also result in bankruptcy, and this can happen all too often in a fluid and recovering economy. Bills can pile up fast in a few short months, especially with interest rates on loans and credit cards well in the double digits. Missed mortgage payments can be paid through Chapter 13 bankruptcy, allowing me to even stop sheriff sales. It is a situation I have seen countless times. Someone is laid off for as little as three or four months, unemployment can't cover the mortgage or credit card payments, they go back to work (sometimes for a reduced salary) but it is too late. The bills are beyond control.

Another common scenario leading to bankruptcy for working individuals is divorce and marital separation. Expenses that were once split must now be paid in full. Two salaries become one, and sometimes all of the bills can't be paid. Divorce can also lead to massive legal bills. Living situations that were feasible while married can fall apart quickly with divorce. Divorce is bad enough on its own, but when it destroys your finances, it makes life that much more difficult. Bankruptcy can help.

Labor Day is a great time to relax and unwind. If you are hardworking and facing debt issues, related to the examples above, or caused by some other misfortune, contact us to discuss your options and see if bankruptcy may provide you with some relief. In the meantime, enjoy summer while it lasts!

Paying for Your Bankruptcy

I am often asked by friends and colleagues, "how do you get paid when you file a bankruptcy for someone." Potential clients ask the same thing. It is a natural and reasonable question. If someone is declaring they don't have money to pay their creditors, where do they get the money to pay their attorney?

I try to be as flexible as possible when coming up with a payment plan for my clients. Very few have enough money put aside to pay all the legal fees and court costs at one time. One thing I will not do... file the case without being paid in full. This is a pretty standard stance in the field. If a bankruptcy attorney is not paid in full before filing, the debt owed by the client is lumped into the all other unsecured debt, such as credit cards and medical bills. Therefore, it becomes impossible to collect for the bankruptcy attorney.

However, despite this limitation, where there is a will, there is a way. The most common plan for my clients involves setting up a payment plan. Once a client retains me with some money down, I can begin to represent them by dealing with their creditors and preparing their petition. Payment plans can be as long as they need to be, and I will stand by my client the entire time. I will advise my clients on what bills need to be paid, and what bills do not. And I will always be available to answer questions.

Another common method to pay bankruptcy filing fees, at least early in the year, is to use a tax refund. This is entirely legal, and makes immediate payment (and filing) possible for many of my clients. The remaining refund can normally be exempted, so it is a win-win situation. Taxes are required to be filed before filing bankruptcy, anyways, so it is often a natural solution. It is something to keep in mind during tax season.

Third-parties, such as parents, spouses, siblings, and friends can also help with payments. This is not an option for everyone, and many of my clients are reluctant to ask for the help. However, when a Chapter 7 bankruptcy can save tens-of-thousands of dollars, it is usually help that close friends and relatives are happy to give. Getting help from friends and family to file a bankruptcy is preferable to continuing to struggle with debt and asking them indirectly for help with things such as child-care (while working a second job), or short-term loans that ended up not being repaid. It is something to strongly consider given the circumstances.

Contact us if you are considering filing a bankruptcy, but can't figure out how you would pay for it. I can help you consider which bills you will no longer need to pay, which may free up some money. I'll be happy to walk you through the situation and help you figure out a plan.

Does Bankruptcy Have a Debt Limit?

Is it possible to have too much debt to file bankruptcy? Can your creditors object because you owe them an especially large amount of money? It depends on the type of consumer bankruptcy you file, but in the vast majority of the cases, the answer is "no".

It is a reasonable question to ask. Whether you owe $5,000 to a couple of credit cards, or $200,000 in medical bills seems like two greatly varied scenarios that would be treated differently. However, in the vast majority of cases there is no difference, debts large and small get discharged just the same.

So, what are the narrow situations where the debt limit in consumer bankruptcy comes into play? Only in Chapter 13 bankruptcy is there an absolute limit or cap on debts that may be included. As of April 1st, 2016 (the limits are updated periodically, so always check at a later date) the limit on unsecured debts is $394,725, while the limit on secured debts is $1,184,200. Unsecured debts are generally credit cards, medical bills, and personal loans, secured debts are generally mortgages, and car payments (which tend to be larger obligations).

Clearly, the number is quite large and will not affect most bankruptcy filers, except perhaps those with very large mortgages, or high amounts of medical or business debt.

As for Chapter 7 bankruptcy, there is no cap. You may exceed these debt limits. For most debtors, this cap will not be a concern. Even seemingly massive debts can be included in a Chapter 7 bankruptcy. Debt amounts are usually not the issue. It is when, and how, these debts are accrued that may become a problem. If debts are run up through fraud or deliberately large purchases in the months preceding filing, there will be an issue, regardless of the size. 

If you are facing the bankruptcy debt limits, there are some options available. An experienced bankruptcy attorney can help you to classify your debts, or seek other bankruptcy options. Contact us with any questions about your debts, large or small.