Federal Unemployment Payments

President Biden’s $1.9 trillion COVID relief bill will extend Federal unemployment benefits until at least September 6, 2021. This will continue to act as a $300.00 per week top-up on state unemployment benefits. This is important for bankruptcy purposes for a couple reasons.

First, this additional $300.00 can be used to meet current obligations in Chapter 13 bankruptcy. This has helped many people maintain there payments, or keep their mortgage current. But for this payment, many Americans would not have been able to keep secured payment obligations such as cars and homes. Not only has it been important for people in bankruptcy, it has been important keeping people OUT of bankruptcy.

The second issue is more problematic, however, for people in the process of filing bankruptcy. The $300.00 a week in addition to state unemployment occasionally provides them with too much income to file. This is especially true of the income and expense analysis in Schedules I & J of the bankruptcy forms. (NOTE: It will not push you above the “means test” threshold if your income is being calculated with a spouse who is still working).

One solution is to wait. The benefits are scheduled to end in September. At that point, they may be renewed, reduced, or eliminated. Chapter 13 could also be an option. However, it is not a great option, as it costs more, and with the benefits likely to end in September, it may not even be feasible.

Federal stimulus benefits are an important part of the American financial recovery. Call us at 412-414-9366 to see if they will affect your ability to file bankruptcy.

Update Means Test Income Thresholds

The United States Trustee means test thresholds have been updated as of April 1, 2021.

These tables are used to determined if household income is too great to file a Chapter 7 bankruptcy. They are updated every year to account for inflation and the increased cost of living.

Household size is largely determined by the number of people living in the home who are claimed for Federal income tax purposes (with some exceptions). Most sources of income count towards the means test, and one-time payments or bonuses also count in the look-back period. Benefits derived from the Veterans Administration of Social Security do NOT count.

As an experienced bankruptcy attorney, I will be happy to discuss your income and whether or not you qualify under the means test.

The annualized income threshold as of April 1, 2021 are as follows:

• Household of one: $57,919.00

• Household of two: $71,448.00

• Household of three: $88,293.00

• Household of four: $105,138.00

• Household of five: $114,138.00

• Household of six: $123,138.00

• Household of seven: $132,138.00

Call me at 412-414-9366 if you have questions about the means test, and how it applies to you. I would be happy to do a free consultation and see if bankruptcy is an option for you.

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.