"Can I Keep My Car?"

This may be the most frequent question I am asked when I first meet with a new client. Thankfully, in most cases the answer is "yes", assuming you want to keep the car.

The Bankruptcy Code allow filers to keep their vehicles using the bankruptcy exemptions. The exemptions protect your car, home, and other personal property. The idea is to give filers a "fresh start", and a fresh start would not be possible if you were required to surrender all of your property to your creditors. You need your car to go to work, pick up your kids from school, and generally to live your life. So, it makes sense that bankruptcy law would you to continue doing these things by protecting your car.

However, this protection is not without some limitations and qualifications. First, in order to keep your car, you need to be able to continue to make payments. If you are behind on the payment, or do not have the income to make the payment going forward, you will need to surrender the car. Bankruptcy will wipe out your obligation on any amount owed, however the car will need to be surrendered. Bankruptcy law does not allow you to keep a car you cannot afford to pay for.

In some case, my clients want to surrender a car, either because the payment is too high, and/or the car does not run well (or at all). This is not a problem. In these cases, we will notify the finance company through the "Statement of Intent" that the car will be returned. You will be under no obligation to pay on the deficiency. Sometimes my clients believe they MUST keep their car, but they don't.

What if you are behind on the payment (perhaps due to temporary job loss) but wish to keep the car? You can still keep it through a Chapter 13 bankruptcy. Chapter 13 bankruptcy will allow you to catch up on the arrears and make the payment spread out over 3-to-5 years. Chapter 13 bankruptcy can even get your car back from the repo yard, as long as it has not been auctioned. Of course, this could make the car prohibitively expensive, but if you are comfortable with the payment and truly need the car, Chapter 13 bankruptcy can save it. It is rarely too late.

You cannot keep the car in Chapter 7 bankruptcy if you are behind on the payment. You will need to catch up (and keep the payments current) before filing. It is sometimes important to clearly explore all of these options before deciding what type of bankruptcy to file. Will you be able to finance another vehicle after bankruptcy? Do you owe far more than what the car is worth? What type of working condition is it in? These will be important questions to consider.

If you have multiple cars, or a motorcycle along with your car, the exemptions to protect them all may be strained. In these cases, we will need to examine the value and necessity of each vehicle. In any case, you can even keep multiple cars that are not exempt, as long as you file a Chapter 13 bankruptcy.

For now, it is only important to know that yes, you can keep your car in almost every situation in bankruptcy. Contact us if you wish to set up a free consultation. We will discuss any situation with your car and everything else relevant to filing bankruptcy.

Chapter 13 Wage Attachments

Chapter 13 bankruptcies require payments to be made to the Chapter 13 trustee. The trustee then disperses money to your various creditors, in amounts that are determined by bankruptcy law and your bankruptcy plan. How do you pay the trustee? If you are employed, my office is required to file a wage attachment.

A wage attachment motion is filed with the bankruptcy court after the initial case filing. Court permission is required to attach your wages, but this is pretty much a formality. Once the court approves the motion, an order signed by the bankruptcy judge is sent to my office. I then serve the order on the payroll department of your employer, along with other information to make sure they properly identify you.

The wage attachment, once in effect, will deduct money from your pay every pay period. Even though your bankruptcy payment is calculated on a monthly basis, the payments will be deducted each pay period, whether you are paid monthly, bi-weekly, or weekly. The money is directed to the trustee, who actually administers your case payments. This will continue through the completion of the bankruptcy case.

You will be responsible for making any payments not directly deducted from your paycheck. So, if it takes several weeks for your payroll department to process the order, you are still required to make the payment. Contact us for instructions how to do so.

As long as your employment is steady and uninterrupted, there should be no problems with your wage attachment. However, if you change jobs, or lose your job, you will need to inform your attorney immediately. Your wage attachment will need to be terminated (which requires another motion and service) and a new wage attachment must be filed. This should be done as quickly as possible to avoid any gaps in your payment. Once again, payments not made through the wage attachment must be made directly.

Clients are often concerned that the wage attachment will affect their employment in some way. It will not. An employer cannot sanction you, and in practice, they rarely if ever care. Most payroll departments process the orders with no confusion or problems. Wage attachments are not allowed on pensions, or disability payments. In these cases, payments must be made directly to the trustee.

The prospect of a wage attachment sometimes causes trepidation on the part of my clients. However, there is no reason to be concerned. The process is efficient, and secure. Case with wage attachments have much higher rates of success, as they greatly simplify the process. I will be happy to answer any questions related to the wage attachment requirement.

Do I Qualify For Chapter 7 Bankruptcy: Part 3

In my two previous posts, I discussed the importance of income and equity in determining if you qualify for Chapter 7 bankruptcy. In this third related post, I will discuss several other issues which may determine whether you will be able to file a Chapter 7 bankruptcy, or if you must file a Chapter 13 bankruptcy.... or if you are eligible at all.

The first important question to review is whether or not you have ever previously filed a bankruptcy. It is important to know if you have previously filed a Chapter 7 bankruptcy because you are only eligible to file another one 8 years after the previous date of filing. If your previous filing is too recent, there are really only two options... wait to file another Chapter 7 bankruptcy, or consider a Chapter 13 bankruptcy, which will allow another discharge of your debts, but will require you to repay at least some of your creditors. If you have filed another bankruptcy, definitely let your attorney know. Timing your case may be very important.

It is also important to know how long you have lived in the state in which you want to file. You must be domiciled at least 91 days in the state in which you wish to file. Domicile simply means the place where you consider it to be your home. For instance, if you rent an apartment in Pennsylvania, but often travel for weeks (or months) at a time out of state, Pennsylvania will still be considered your state of domicile. If you cannot wait the necessary 91 days, you will be forced to file in your previous state of domicile. This is important, because you absolutely cannot file in a state in which you are not domiciled.

Filing your taxes is also a requirement to filing Chapter 7 bankruptcy. If you have not filed your taxes, your bankruptcy attorney will have you complete them before filing your case, otherwise the case cannot be completed with a discharge. It should be noted, you will not be required to pay and Federal Income Taxes if you owe money. You are merely required to have them filed. Unfortunately, they will generally not be dischargeable.

A final issue that may prevent you from filing a Chapter 7 bankruptcy would be a recent transfer of property (such as a home or a car) to a friend, family member, or business associate. If you have made such a transfer in the past two years, let your bankruptcy attorney know when you discuss your case. It may be necessary to delay your case filing, or have the property returned.

Taken together, these issues along with your income and equity in your home will largely determine if you qualify for a Chapter 7 bankruptcy. Contact us if you would like to discuss your situation in detail in a free consultation. Chapter 7 bankruptcy may be a great option for you.

Do I Qualify For Chapter 7 Bankruptcy: Part 2

In my most recent post, I discussed the importance of income in determining if you qualify for Chapter 7 bankruptcy. In this post, I will discuss the importance of your mortgage in determining if you qualify. I always inquire into a potential client's mortgage situation after asking about income.

If you rent and do not own a home, you can skip this post. However, if you are considering filing a Chapter 7 bankruptcy and you do have a mortgage, read on. The particulars of your mortgage will be the second thing I discuss with any potential new client. This is because the current status of your mortgage payment, and the equity you have in your home, help determine if you qualify for a Chapter 7 bankruptcy.

"Equity" quite simply is the value of your home, minus all the liens on the home (mortgages, home equity loans, tax liens, etc.). So, if your home is worth $150,000, but you have a $100,000 mortgage, and a $30,000 home equity loan, your equity is only $20,000. If you owe more on your home than it is worth, you have "negative equity". This is sometimes know as being "underwater" on a loan.

Why is equity so important to Chapter 7 bankruptcy? Because the federal exemptions available to protect the equity in your home from your creditors is limited. It is roughly $26,000 per filer (about $52,000 if the home is jointly owned with a co-filing spouse). Exemptions are very useful, but they are limited. If the equity in your home exceeds the exemptions, you have only two options. First, you can surrender the home, with the equity being liquidated to pay your creditors (not a great option!) Or, you can file a Chapter 13 bankruptcy and repay the unexempt equity, dollar-for-dollar, to your unsecured creditors (such as credit cards).

So, one of the first questions I ask a prospective client is, "How much is your home worth, and what do you owe on it?" Your first consultation will be more useful if you do a little research on the value of your home (checking online real estate websites such as Zillow) and find a most recent mortgage statement. If your equity is too great, we will need to look at a Chapter 13 bankruptcy, but if not you still may qualify for a Chapter 7 bankruptcy. Try to know the value and amounts owed on your home when meeting for your first consultation with your attorney,

A second important issue regarding mortgages and filing Chapter 7 bankruptcy is whether or not you are current on the mortgage. If you are behind on the mortgage, and you want to keep the home, you must file a Chapter 13 bankruptcy and catch up the arrears over a three to five year repayment plan. The Court will not let you file Chapter 7 and keep a home with arrears or while in foreclosure. However, you can file a Chapter 7 if you wish to surrender a home with arrears, and those arrears will be wiped out.

When I ask a prospective client about their mortgage payment, the current status of the payments is also important. If you are only a month or two behind, you can possibly catch up the payments and file Chapter 7. However, if you are three or more months behind, you will need to consider filing Chapter 13, or surrendering the home. Make sure you arrive at your initial consultation with this information.

(As a quick side note- the same holds true for car payments. If you are behind on your car at the time of filing, and want to keep the car, you will need to file a Chapter 13 bankruptcy, or surrender the car.)

So, after looking at your income, we must look at your mortgage situation to determine whether the equity in your home is fully exempt, and whether you are current on your payment. The third and final part of this blog post will discuss some miscellaneous issues that determine Chapter 7 bankruptcy eligibility. These issues will be discussed in my final post on the subject.

Contact us if you have any questions regarding your eligibility to file a Chapter 7 bankruptcy. I am an experienced Pittsburgh bankruptcy attorney who will be happy to discuss your situation at a free consultation. 

Independence Day

The 4th of July is a great opportunity to relax, spend time with family and friends, and enjoy the heart of summer. It is also (sometimes) used to reflect on the birth and history of the United States. The revered "Founding Fathers" established a federal systems of checks and balances that still is the envy of much of the world, more than 250 years later.

Thomas Jefferson, in addition to being the third president of the United States, was the primary drafter of the Declaration of Independence. What is less well known is that he struggled with creditors throughout his life, including during and after his presidency. Jefferson died with debts in excess of $100,000, an amount more akin to several million dollars in current debt. While much of his debt was inherited, and it was not uncommon for farmer-planters of his era, it greatly troubled Jefferson during his life. Many of the voluminous letters of the champion of self-sufficiency referred to financial concerns and stress. Jefferson was no different that many Americans in being unable to meet his financial burdens, even with his inherited wealth and advantage.

It is also little-known that Abraham Lincoln suffered financial problems early in his professional life. When a partner is a dry goods (general store) partnership disappeared, Lincoln was stuck with the bills. Like Jefferson, Lincoln struggled with the debt burden and was greatly troubled by his situation. It took many years, and a successful law practice, to overcome the debt, but Lincoln never forgot the feeling. His frugality continued throughout his entire life.

Other presidents felt the financial crunch. Ulysses S. Grant struggled with debt after bad investments throughout his life, and was forced to sell his autobiography (written while extremely ill) to pay his basic bills. And of course, Donald Trump filed 4 bankruptcies, though these were Chapter 11 business bankruptcies. Other presidents, such as Lyndon Johnson and Bill Clinton grew up incredibly poor. Johnson grew up in extreme poverty when his father's ranch failed. Many historians believe it drove his desire to create the "Great Society" and the "War on Poverty".

The United States bankruptcy code is established under federal law, and bankruptcy itself is recognized in the United States Constitution. So, while you are reflecting on United States history this week (between beers and hot dogs) remember that not only is it a part of our federal system, it was established and maintain because even some of the best among us need the help.