Protect Your Car in Bankruptcy

One of the most common concerns I hear when I speak to someone for the first time about bankruptcy is whether or not they can keep their automobile. It is a reasonable concern. Without a car, many people would find it impossible, or at least very difficult, to get to work. Or take their children to activities, or go to the grocery store, or do most of anything. Losing their car would be a non-starter for filing.

The good news is, you don’t have to lose your car when you file bankruptcy.

Now, there are a few important things to note. First of all, you have to be able to make the payment going forward. Bankruptcy can discharge (or wipe out) an old loan on a vehicle that was repossessed or totaled. You can also surrender your current vehicle and avoid any future obligation to pay. However, you cannot eliminate the remaining balance on a vehicle AND keep it going forward. Cars are “secured” debt… if you don’t pay the loan, the finance company or dealership will take back the “security” (the car).

If you want to keep a vehicle in Chapter 7 bankruptcy, you must be current on the payment at the time of filing, and you must keep the payment current in the future. If you are behind on the payment, the only option for keeping it is to file a Chapter 13 bankruptcy, and submit a bankruptcy plan to catch up the payment. While this is a useful option, this is not the simplest option, as a Chapter 13 is more complicated, longer in duration, and more expensive. You will want to get the payment current, if at all possible.

A separate question might be if you have multiple cars. You will not necessarily need to surrender a second or third car, especially if there are multiple driving adults in the home. The issue may be whether or not you are able to “exempt” your cars from your creditors.

Exemptions in bankruptcy law allow you to protect assets, including cars. There is a $4,000.00 exemption that can be used towards the equity in your car, equity being the value minus the remaining balance owed. For most people, this is not an issue, as cars depreciate quickly, and it is common to owe more than what it is worth. If you have a car you own outright, you will need to discuss the value with your bankruptcy attorney to make sure it is not an issue. For instance, if you have a classic car that you rarely drive, it might be difficult to exempt.

I am an experienced bankruptcy attorney who has been helping people file for bankruptcy protect, and keep their assets such as cars, for over 13 years now. Call me to set up a free consultation to discuss your situation.

Chapter 13 Wage Attachments Concerns

Chapter 13 bankruptcies in the Western District of Pennsylvania typically require the debtor to submit a wage attachment to fund their Chapter 13 plan.

This sometimes makes prospective filers nervous. Will this wage attachment leave them with enough money each month? Will it reflect badly with their employer? Can it be stopped? These are all reasonable questions.

First off, the amount of money coming from your wage attachment will be split from each paycheck, so it will not completely wipe out an entire paycheck. Now, the amount attached will be determined by a number of factors, so the difficulty of meeting the payments will depend on how much is owed. However, as your attorney I will explain exactly what makes up your payment and answer any questions about it. If a Chapter 13 payment is completely unfeasible, it will probably not be worth filing. So, it is important to understand why it is what it is.

Second, employers and payroll departments almost certainly will not raise any issues. Large employers are quite experienced with processing these wage attachments. In filing cases for almost 15 years, I have not experienced any issues with an employer processing a wage attachment. It is a standard procedure, and it helps the filer fund a plan that is intended to help them. Employers shouldn’t want to make this more difficult (and almost never do!)

Finally, a Chapter 13 bankruptcy is a voluntary act. If you don’t want to do it anymore, you don’t have to! A Chapter 13 bankruptcy can be ended at any point. There will never be any issue where the bankruptcy wage attachment is coming out when you don’t want it to. Now, this would end the protections of Chapter 13 bankruptcy, but you are never stuck.

If you are in Chapter 13 bankruptcy, or considering it, and you have questions about the wage attachment process, call me at 412-414-9366.

Marriage and Joint Bankruptcy

The bankruptcy code allows married debtors to file joint bankruptcies, much the same way joint tax returns are filed. Joint bankruptcies make sense if both spouses are facing significant debts, whether or not they were accumulated together or apart. However, joint bankruptcies are only available for married couples.

Joint bankruptcies provided many benefits for couples seeking bankruptcy relief. First, filing fees must only be paid once, which will save $300+. Second, there is convenience in only having to provide your attorney with one set of documents, with only one petition to fill out, which will reduce office visits and correspondence. This will also save money and time. Third, there will only be one Meeting of Creditors to attend, which will save more time. You will want to file a joint bankruptcy if at all possible.

As mentioned above, joint bankruptcies are only available for married couples. Unfortunately, engaged couples, or couples merely living in a "common law" situation cannot file. Boyfriend and girlfriend cannot file. Siblings and parent-children cannot file even if they have joint debts. Only married couples, no matter how long you have been together.

Same-sex married couples have been recognized by the bankruptcy court since 2011. This will also apply to civil unions, depending on state law. Same-sex couples will enjoy all of the benefits of a joint bankruptcy.

If you are engaged, and both you and your future spouse both share significant debts, it may make sense to get married if you have been considering it. However, even if you are not considering it, you can always file two separate, individual bankruptcies. I tell my clients that bankruptcy should not dictate important futures plans such as marriage, but it is something to consider if it is happening soon anyways.

Contact us if you wish to discuss the issues involved with filing a joint bankruptcy. I'll be happy to set up a free consultation and try to help you determine your best path going forward that will not only be effective in discharging your debt, but also in saving you time and money.

"Income" in Bankruptcy

The definition of income seems simple enough. How much money do you make? But, like most things in bankruptcy law, it is a bit more confusing than that.

First of all, there are two ways of looking at income, gross income and net income. Gross income is the money you earn before taxes, and net income is your earnings after they are removed. Both are important in bankruptcy. Your gross income will be considered in the “means test” (which is discussed in greater detail elsewhere on this blog and website) while your net income will be used in Schedules I & J in the bankruptcy petition.

While gross and net income will generally be proportional in most cases, sometimes they can differ between filers. For instance, net income can be lower if your tax withholdings are particularly high, or if you have large deductions for insurance or retirement accounts. Either way, your bankruptcy attorney will need to discuss both types of income with you in order to determine your eligibility to file bankruptcy.

The definition of income can also be confusing in bankruptcy because the court will consider certain payments to be “income” that go beyond your paycheck. For instance, any type of government benefits will be considered income. This includes Social Security, unemployment compensation, VA benefits, and even food stamps. Adding further confusion, Social Security is considered income for purposes of Schedules I & J of the bankruptcy petition, but NOT for the means test!

The court will also consider other indirect payments as “income”. This includes household contributions towards expenses, side jobs, and even one-time windfalls like lottery winnings! A contribution towards expenses from a roommate is not the traditional ideal of “income”, but in bankruptcy, it is.

This can all be very overwhelming for an individual trying to determine on their own if they qualify. But, I would be happy to discuss your situation and help you determine your bankruptcy “income”. The primary purpose of this blog is let you know you should disclose ANY type of income you may have to your bankruptcy attorney, even if your don’t think of it as “income” per se. As an experienced bankruptcy attorney, I will be happy to walk you through this confusing subject in a free phone consultation. Call me at 412-414-9366.

Protecting Your Tax Refund

Tax season is once again upon us, as we begin to receive our W2s and 1099s. Just like frigid Pittsburgh weather, we can complain… but it won’t do any good!

For many of my clients, tax refunds are an important part of meeting their monthly obligations. Tax refunds are often used to catch up mortgages, do household repairs, or buy necessities. For many Americans, tax refunds are a form of forced “savings”. Losing a tax refund could be catastrophic.

Individuals looking to file bankruptcy are therefore usually concerned about losing their refund. Luckily, bankruptcy law allows for “exemptions” which can be used to protect your property and assets from your creditors. These exemptions are not unlimited, so it is important to discuss them with your bankruptcy attorney, and to list all of your property when meeting with him or her.

There is not an exemption dedicated solely to tax refunds. However, the Federal exemptions under bankruptcy law do provide a “wildcard” exemption. Depending on how equity you have in a home (if you have one) the value of this wildcard exemption could be anywhere from zero up to nearly $10,000 for an individual.

An experienced bankruptcy attorney can make sure these exemptions are maximized. If you are looking to file bankruptcy soon, and expect to get a significant tax refund this year, you should file your taxes as early as possible so that the amount can be determined and exempted. As long as it can be exempted, you can file your bankruptcy without concern of losing it. If it goes beyond the value of your exemptions, you will need to discuss the situation further with your bankruptcy attorney.

Also, it should be noted there are things you can do with your refund that are strongly frowned upon or forbidden by the bankruptcy court. Paying back friends or family with a “preferential payment” would be one. Making a large frivolous purchase may be another. Talk with your bankruptcy before spending any of it if you have any doubts.

If you are concerned about your pending tax refund, and are considering filing Chapter 7 bankruptcy (or Chapter 13 bankruptcy), can me at 412-414-9366. Or email me and set up an appointment. With my experience, I will make sure you keep all of your refund, or as much as possible. Tax season doesn’t need to be ALL bad.