Updated Means Test Median Family Income Tables

Effective April 1, 2020, the table used to determine the “means test” in Chapter 7 and Chapter 13 bankruptcy has been updated for the Western District of Pennsylvania.

The amount you can earn without repaying unsecured creditors is determined by 1) your household size, and 2) your household income. This information is used to calculate the “means test”, which is an objective standard of whether you are required to repay.

Your household size will, with only a few exceptions, include you, your spouse, and any children you claim on your taxes. Your spouse will be included for calculation purposes even if they have no intention of filing bankruptcy. They will not be included if you are legally separated and living in separate households. Children will be included as long as they are still claimed on your federal income taxes. Non-claimed children will not be included for purposed of household size.

Household income is broadly calculated to include almost anything besides benefits derived from the Social Security Act. This includes unemployment, bonuses, self-employment, or even alimony and child support. The look-back period is the six months before filing bankruptcy.

It is important to point out that it will NOT include income received as part of the CARES stimulus act.

One last important thing to remember is that income is determined by GROSS, before tax, income. Here is the updated chart for gross income in the six months before filing, as of April 1, 2020 (amount listed below is combined income for all household members, averaged per month):

• Household of one: $4,550.00 per month

• Household of two: $5,628.00 per month (including all earners)

• Household of three: $6,989.00 per month (including all earners)

• Household of four: $8,610.00 per month (including all earners)

• Household of five: $9,360.00 per month (including all earners)

• Household of six: $10,110.00 per month (including all earners)

• Household of seven: $10,860.00 per month (including all earners)

Contact us for a more detailed analysis of your income. If you are able to forward me proof of income, I can determined whether or not you will be required to pay unsecured creditors in bankruptcy.

If your income is disrupted by the COVID-19 epidemic, now may be the best time to file.

COVID 19 UPDATE- Unemployment Benefits

Pennsylvania’s Department of Labor and Industry has announced two important policy changes in the midst of the COVID-19 pandemic, effective immediately.

First, the normal two-week waiting period to receive benefits has been waived. Unemployment benefits will become available immediately upon filing.

Second, the normal work search and registration requirement has been temporarily waived for all claimants.

These two policies should help those laid off due to the COVID-19 economic halt to receive benefits more quickly and with less hassle. The duration of both policies is unknown at the moment, but both will presumably apply for the next several months, if not longer.

When applying for this reason, make sure to select “lack of work” for the reason before filing.

Obviously, this is a fluid situation. It is likely that other policies will be effected and changed going forward. I will update my blog as information becomes available.

COVID-19 UPDATE - HEARINGS AND MEETING CANCELLATIONS

In an attempt to keep my clients informed as to bankruptcy meetings and conciliations, I will update my blog as information becomes available.

The Chapter 13 Trustee’s office is effectively closed for the near future (and obviously, possibly longer). The following conciliation and meeting of creditors dates have been POSTPONED (to be rescheduled by later court hearing):

March 19th, Pittsburgh POSTPONED

March 20th, Johnstown POSTPONED

March 24th, Erie (meetings to occur telephonically)

March 26th, Pittsburgh POSTPONED

March 30th, Pittsburgh, POSTPONED

I am keeping very limited office hours for the foreseeable future, but will remain completely available by phone (412-414-9366) or via email at attorneymatthewbrennan@gmail.com

Stay safe.

Income Tax Refunds and Bankruptcy

Many Americans rely on their Federal Income Tax refunds as a source of savings and a means for paying debts and expenses. Depending on their deductions and dependents, some individuals can receive thousands of dollars. If you are on a tight budget, this is an important source of money.

Fortunately, tax refunds can generally be protected in bankruptcy. Tax refunds (or prospective refunds, if the taxes have not been filed) must be listed in Schedule B of the bankruptcy petition. However, they can then be exempted in Schedule C using the bankruptcy exemptions, which allow you to protect most, if not all, of your personal possessions.

For this reason, at this time of year when taxes are filed and refunds are received, it is important for individuals in the midst of bankruptcy to file their taxes as early as possible. The bankruptcy exemptions are not unlimited, so it may be necessary to determine if the bankruptcy can be filed immediately after receiving the refund, or not. I tell my clients this time of year to file as soon as they get their W2s and 1099s so I can then run the refund past the available exemptions.

When anticipating filing bankruptcy, it is also important to be clear what you can, and cannot, do with your refund. You can pay your attorney, pay for repairs for your home or car, or pay for other necessary household expenses. On the other hand, you should not pay back friends or family members, make frivolous purchases, or pay off someone else’s debts.

A side note… if you regularly receive a large refund, you should consider having your employer withhold less. When you get a large refund, you are essentially giving Uncle Sam a yearlong interest-free loan! It’s better to have that money throughout the year (though some of my clients have told me it works as a way of “forced savings”, so to each his own.)

If you are considering filing for bankruptcy during tax season and you are not sure what you can or cannot do with your refund, contact us to set up a free consultation to discuss your situation!

The Importance of Being Thorough in Bankruptcy

The bankruptcy process can get fairly complicated at times. There is a bankruptcy petition that must be completed accurately and submitted. It can sometimes be more than 60 pages long. There are also document requirements that can be quite extensive. You will need to provide taxes, paystubs, proof of retirement accounts and life insurance, among other documents. Everything must be submitted in the proper form before any deadlines expire. Given these requirements and the complexity involved, it is very important to be thorough while preparing your bankruptcy file.

The bankruptcy petition is filed under federal law, under the penalty of perjury. That means, if you lie on your petition, you could go to jail. But, there is no reason to lie, and this should not be a concern. I always tell my clients, "if you are thorough and honest, there will not be any problems in bankruptcy." I can be confident about this because, as long as you tell me everything, I can anticipate any problems that might arise. If there are any problems, we will wait to file your case until the problems are solved, or look at an alternative to filing. As long as I have all the information as your attorney, I can guide you in what to do.

So, what does being thorough mean in the context of filing bankruptcy? It is very important to tell your attorney about any sources of income, or any real estate or vehicles you own. Income is important because it may determine what type of bankruptcy you can file. Income has a broad definition in bankruptcy, so you will need to tell your attorney about unemployment compensation, Social Security or other government benefits, part-time work and bonuses, and even child support and alimony. If in doubt as to whether some source of money is relevant, tell your attorney. If you have money coming in to you in any form, consider it "income".

Listing all of your assets is also extremely important. Once again, bankruptcy has a very broad definition of "assets." I will review this list with you in Schedule B of your bankruptcy petition. The most important asset to be clear (and thorough) about is any real estate for which you have an interest. This will obviously include your home, but it will also include rental properties, burial plots, campgrounds, mobile homes, and trailers. You must also disclose any fractional interest you have in real estate. For instance, if you have a 1/8th interest with seven cousins on a campground... let your bankruptcy attorney know. If there is one thing that can ruin a bankruptcy case, it is leaving out real estate that you own on your petition.

The same is true for automobiles (including motorcycles) and bank accounts. If you are on a title, deed, or account, let your attorney know. 

It is also important to be thorough in preparing your bankruptcy petition with your attorney because it will save you money. If you leave something out, and your attorney needs to subsequently amend your case, that could cost hundreds of dollars. So, review your credit report closely to make sure none of your creditors is missing. Make sure you provide your bankruptcy attorney with a list of all of your savings and retirement accounts, and life insurance. The more information you provide, the better.

Finally, always remember to ask questions of your attorney. I have found that the vast majority of my clients want to be helpful and forthright. However, some misunderstand a question or requirement or document request. If you have hired an attorney, it is part of his or her job to make sure you understand the process, and your requirements and duties. So, don't be afraid to ask questions!

I go the extra mile to be thorough in preparing my bankruptcy petitions with my clients. Not only is it the right thing to do, it is good, efficient business. If you would like to discuss your situation and schedule a free consultation, contact us to set up an appointment.