Getting Ready For The Meeting of Creditors

My clients are often anxious about their bankruptcy Meeting of Creditors. This is understandable, as the process is new and unknown to them. However, a little preparation beforehand can greatly reduce the anxiety by making it clear that the process will go smoothly. What exactly do you need to know about your Meeting of Creditors? Here are some simple tips.

First, you will need to know the location and time of the meeting. This will be mailed to you by the Court, in the form of the Meeting of Creditors Notice. If you do not receive this notice within a few weeks of filing your case, contact your bankruptcy attorney. The location will be determined by your county of residence at the time of filing, and the date is usually 4 to 6 weeks after filing. It is important to schedule appropriately once you receive this date, as you may need to miss work or school, or get a babysitter. You'll have plenty of time to do so, but if you fail to appear twice, your case may be dismissed. Once again, if you have any questions about the location, contact your bankruptcy attorney immediately.

The second thing you will need to be prepared is a government issued photo ID and your original Social Security card. These are used by the Trustee to identify you, and your Meeting of Creditors will not proceed without them. Make sure you put both pieces of information aside, as failure to do so will lead to a rescheduled meeting, which may result in additional legal fees.

You may also want to review the information sheet provided by the US Trustees office before your Meeting of Creditors. You will be asked directly if you have reviewed this sheet. Your bankruptcy attorney should review this information with you before filing, which includes filing requirements and information about the different types of bankruptcy. This information sheet should be available at the meeting location if you have not reviewed it beforehand.

If your case is a Chapter 13 bankruptcy, you should also bring proof that you have begun making payments into your plan. This may include a copy of any money order you mailed in on your own, or a recent pay stubs showing the wage attachment being deducted. This shows the Trustee that you are complying with the terms of your plan, and that granting interim confirmation is reasonable.

Finally, each trustee will ask a set of his or her own questions. You should review these questions with your attorney at least once before your meeting date, and on the day of the meeting. Knowing the questions, and how straightforward they are, should greatly reduce your anxiety over the process. The questions differ slightly from trustee to trustee, but an experienced bankruptcy attorney should know exactly what they will ask. Reviewing these questions once last time may also jog your memory of any errors or omissions, of which the trustee should be made aware. If you review the questions beforehand, nothing should take you by surprise on the day of the meeting.

In summary, preparing for your bankruptcy Meeting of Creditors is simple... know the time, date and location. Be familiar with the questions. Have your ID cards. Contact us with any questions about your bankruptcy Meeting of Creditors. It will go more smoothly than you can imagine.

Summer Is Here

Summer is all too brief in Pittsburgh, but with Memorial Day in two days, it is finally (almost) here. Summer has great associations of family, friends, fireworks, cookouts, and baseball (or, in Pittsburgh, playoff hockey and Steelers training camp). However, for families facing debt, it can cause a few issues. Here are a few tips if summer is causing more worry for your budget than you care to think about.

• Seasonal employment. It can either help or hurt your budget. If you are a teacher or work in the education field, summer can mean a major decrease in income. If you are in Chapter 13 bankruptcy, this can negatively impact your plan payment. If you are facing a summer decrease in income, or even unemployment, let your bankruptcy attorney know as soon as possible. He or she may need to alter your bankruptcy plan to account for the reduced income. On the other hand, summer may mean an increase in income if you work in construction or the service industry. Warm weather may be your best opportunity to put some money aside, or catch up on a Chapter 13 bankruptcy plan. Be sure to let your attorney know about any large increases, as well. An increase in income could prevent some people from filing Chapter 7 bankruptcy.
• Increased childcare costs. No school is great... to kids. However, parents may face daunting day care and babysitting bills while the kids are home. This is another major stress on Chapter 13 bankruptcy plans. It's best to plan ahead, but if school lets out without a plan in place, you may need to wing it, or even delay a bankruptcy filing. This is a short-term problem, but no doubt a problem for some.
• Vacation costs. Vacations are another stress on tight budgets. It's hard to say "no" to kids wanting to go to the beach, or even to deny yourself after a hard year of work. But, if you are facing financial difficulties, it may mean taking a more modest vacation. One week instead of two, and driving instead of flying (especially with kids) can make budgeting a vacation much more manageable.
• Moving. Summer is the time of year where most people will move to new apartments and rentals. If you are considering bankruptcy, moving beforehand may be a good idea. Most landlords will not care about a bankruptcy on your credit history, but for the few who do, filing after signing your lease may be prudent.

I always tell my clients that debt and finance problems are temporary and fixable. They should not ruin your summer, let alone you life. If you are considering filing bankruptcy this summer, contact us to set up a free consultation.

Non-Filing Spouses and Bankruptcy

Married couples are not required to file a joint bankruptcy when one spouse needs to file. Having one spouse file, and one spouse NOT file is completely permissible. However, the non-filing spouse will usually need to provide some information for the petition, even if they are not included. This is because the bankruptcy court considers household income when married spouses, living together, file a bankruptcy. The are also a few other things to consider when filing a bankruptcy for married couples, as well.

When a bankruptcy is filed, a means test must normally be completed to show household income for the six months previous to filing bankruptcy. This includes the income of non-filing spouses. Some of my clients will ask, "but, my husband/wife is not filing, why does their income need to be considered?" It does because, basically... bankruptcy law says it must be included. Congress determined in drafting the bankruptcy code that the ability of one spouse to repay the other's debt should be considered, so that is the law we need to work with, for better or worse. For that reason, I will need to 6 months of pay stubs for BOTH spouses. I will also normally need two years of tax returns for spouses, as well.

Once again, you need to be married for this to be the case. The income of fiancees or boyfriends/girlfriends does not need to be considered. Also, you must be living in the same household as your married spouse. If you are separated and keeping separate households, only the income of the filing spouse must be considered.

Non-filing spouses may also be important in determining the status of your property at the time of filing, and whether it can be protected from your creditors in bankruptcy. The bankruptcy exemptions normally allow filers to protect all of their property, but sometimes these exemptions can be exhausted. For instance, you are normally allowed to protect about $26,000 in equity in your home. This can be a problem in filing Chapter 7 bankruptcy if your equity exceeds $26,000. However, if you are married, and your non-filing spouse has a 1/2 interest in your home, your equity is essentially cut in half, because 1/2 of it belongs to the non-filing spouse. This makes it sometimes important to verify if both spouses are on a deed, and can sometimes be important with other exemptions. Therefore, sometimes we need to consider the property of the non-filing spouse.

Joint debts are also important to consider when one spouse does not want to file bankruptcy. Joint credit card debt, and car payments, are both considered "joint and several liability". This means a creditor can go after one spouse, both spouses, or neither spouse, when collecting a debt. And they can go after just one spouse for all of the money owed on a debt. This becomes important if there are numerous joint debts and only one spouse files a bankruptcy. While the filing spouse will have his or her debts discharged through the bankruptcy, the non-filing spouse will become entirely liable under joint and several liability. So, it is very important to determine who is on each debt, and for how much, because in some cases it will only make sense for both spouses to file jointly.

Contact us if you are trying to decide if filing bankruptcy jointly makes more sense, or if you are able to have only one spouse file. I'll happy to sit down and discuss your situation and see what makes more sense for your household.

Means Test Update, May 2017

The means test is a six-month income look back that is calculated when filing a bankruptcy. It determines if an individual must repay unsecured creditors in a Chapter 13 bankruptcy. This threshold is determined initially by looking at gross household income and household size. The gross income thresholds are periodically updated by the bankruptcy court for each region, to take into account inflation and other factors. They were most recently updated on May 1st, 2017.

The gross income limits for the six months before filing, above which you no longer qualify for Chapter 7 bankruptcy in most cases, are now the following in Allegheny County (as of May 1st, 2017):

• Household of 1: $25,569.00
• Household of 2: $30,635.50
• Household of 3: $37,509.00
• Household of 4: $45,410.50
• Household of 5: $49,610.50
• Household of 6: $53,810.50
• Household of 7: $58,010.50
• Household of 8: $62,210.50

Each additional household member beyond 8 will add $4,200.00 to the threshold.

A few things to point out about this chart. Once again, this is for all household income for the six months previous to filing, including non-filing spouses. Even if a spouse has no debts, or no desire to file, their income will be a part of the calculation if they are married and living in the same household. Pretty much all sources of income outside of Social Security payments is considered income. This includes unemployment, bonuses, retirement distributions, lottery winnings, and rental income. If in doubt, assume it will be income for means test purposes.

Second, dependents are generally determined by their federal income tax status in the family. In short, if you claim a child on your federal income taxes, you can claim them as household members for purposes of the means test. Adult dependents can sometimes be claimed, but you will need to consult an experienced bankruptcy attorney to determine this with certainty.

Finally, remember these numbers are for gross (before tax) income, not net (after deductions) income. If you are above the threshold, but just barely, your attorney can review your deductions to determine your "Disposable Monthly Income", or DMI. This calculation will determine how much, if anything, you must pay your unsecured creditors.

The means test is a moving six month window. Contact us to take a look at your recent income and determine if the means test will be an issue in your case. It may be necessary to wait, or hurry up and file, depending on your recent (and future) income. I will be happy to look at your situation at a free consultation.

Some Bad Habits That Lead To Bankruptcy

Focusing on consumer bankruptcy practice, I file a lot of Chapter 7 and Chapter 13 bankruptcies. I get to meet with a lot of people in similar situations, and I see some similarities in their concerns and problems. Some common trends develop. While these are far from universal, they are some simple things to avoid when trying to fix your credit or limit your debt.

• Open all of your mail. Many of my clients stop opening their bills at some point. I can understand the reluctance to do so. You can only receive so many threatening letters and admonishments before the idea of opening your mail starts causing stress and anxiety. But, it is best to keep opening your mail. For one thing, it keeps you appraised on how much money you owe, and information is extremely important. Second, it can keep you notified about potential lawsuits, repossessions, and garnishments. Too many clients are confronted with problems too late in the process to do anything about it because they do not open their mail.
• Don't buy brand new cars. The value of a new car plummets when you drive it off the lot. Most people know this, but it is a bad idea to overlook this knowledge when you are facing debt problems. Many of my clients are forced to scrap these expensive loans in Chapter 7 bankruptcy and scramble for a more affordable vehicle. Or, they must file Chapter 13 bankruptcy and keep making the payment, which makes completing the process more difficult. Buying a car that is even a year or two old will potentially save you more than $100 per month. Also, rolling old car loans into new car loans can further complicate the problem by putting you even further underwater.
• File your taxes as they become due. Taxes are one of the types of debt that are not dischargeable in Chapter 7 bankruptcy. They won't go away if you ignore them. In fact, failure to pay taxes can lead to future tax returns being withheld, or even worse, garnishments on your wages. Finally, you cannot file for bankruptcy and receive a discharge unless all of your taxes are filed.
• Taking out "payday" loans. These short term bridge loans are normally at extremely high interest rates. While they are dischargeable in bankruptcy, they should still be avoided if at all possible.

Avoiding the above suggestions will sometimes prove impossible, and doing one of the above on its own will not of course automatically lead to bankruptcy. No one is saying, for instance, that you can never buy a new car. But, taken together, these can be viewed as situations that lead to bankruptcy. If you can't pay your taxes, you shouldn't buy a new car. If you take out a payday loan, you better keep track of exactly what you owe, before the debt explodes, etc. Keep these in mind if your debts become a bigger issue every month. Contact us if you feel the need to discuss your issues, we'll be happy to set up a free consultation!