Who Are These Collection Companies???

You might be finding yourself asking this question as you receive collection notices in the mail from unfamiliar companies. You know that you have credit card debt, but the companies that are collecting are entirely new. It might be a company like LVNV Funding, Midland Funding, or Portfolio Recovery Associates. Who are these companies?

Most likely, if you don’t recognize the company that is collecting from you, they probably purchased your debt from the original creditor. This is called an assignment. Unfortunately, this is generally legal. Many people who call me have hopes that these collectors can be easily dismissed. Usually they cannot. However, there are effective ways to deal with them, and sometimes you do not even need to pay them.

First of all, who are these companies? They are companies who specialize in purchasing debt, sometimes for pennies on the dollar, who then use various tactics to try and collect from you. These tactics may include calling you, sending threatening letters, or possibly even suing you. They buy the debts so cheaply that they can turn a great profit by simply collecting on a portion of the debts. So, what can you do to combat these companies and their tactics?

If you qualify for bankruptcy, these debts will almost always be dischargeable. “Dischargeable” means that any rights that these companies acquired from purchasing the debts are wiped out, as is the underlying debt. Even if these collection companies have sued you and received a judgment, the underlying debt will likely be discharged.

Bankruptcy will most likely be the most effective way to deal with these old debts. If, however, you are not able to file bankruptcy or you do not qualify, it may be possible to challenge the lawsuits filed by these companies. Oftentimes these companies will purchase the debts on the cheap, but in doing so they will not buy all of the necessary paperwork to prove what they are required to show when filing a lawsuit against you in the magistrate court. I would need to review information related to the lawsuit to see if this is an option.

Finally, in a worst-case scenario where bankruptcy is not an option and you cannot beat these companies in court, it may be necessary to come to some type of settlement agreement to pay the debt. If you have a lump sum of money available it is possible that they will take less than the full amount of money owed in a negotiation. Their willing to negotiate will vary by circumstance.

Your best option can probably be determined by speaking with an experienced bankruptcy attorney like myself. I would be happy to sit down and discuss any third-party collection agency and what we can do about them. I have been filing bankruptcy on these types of collections for almost 15 years. Do not allow these companies to threaten and scare you. They can be dealt with and disposed of. Call me at 412-414-9366 to set up a free consultation so I can help you determine your best path going forward!

Property Taxes and Bankruptcy

Property taxes are a frequent problem I hear from individuals who are considering bankruptcy.

If your property taxes are paid through an escrow account, you will likely be in arrears if you’re behind on your mortgage payment. If you have no mortgage payment, it is likely that you are responsible for paying your property taxes directly. Either way, it is important to make sure you do not fall behind, as this can lead to penalties, fees, or even foreclosure of your home.

Property taxes can be included in a bankruptcy filing, but they normally need to be paid in order for you to receive a discharge at the end. While property taxes are not dischargeable in Chapter 7 bankruptcy, they can be listed and used to reduce the equity you have in your home (search elsewhere in this blog for a discussion of “equity” and how you determine it). This can be useful if you may have too much equity and otherwise would not be able to protect it all in Chapter 7 bankruptcy.

However, if you file Chapter 7 bankruptcy when you owe property taxes, those property taxes will not be discharged or eliminated. In a Chapter 13 bankruptcy, property taxes can be included and paid over the course of the Chapter 13 bankruptcy plan. This means you can spread out the balance owed over a five-year period, if necessary. A good thing about paying property taxes through a bankruptcy is that you can limit any additional fees and penalties, though you will be responsible for paying interest. This may make it much easier to pay your balance, as property taxes may be due in full if you were behind for several years. This can lead to a sheriff sale on your property.

It should be noted that it is important to continue paying your property taxes while you are in Chapter 13 bankruptcy. If you don’t, by the end of the plan you may be caught up with older property taxes, but will owe all of the property taxes that came due over the course of the plan. This may require a second Chapter 13 bankruptcy filing, which you would ideally want to avoid.

If you are in arrears on your property taxes, call us for a free consultation at 412-414-9366. I would be happy to discuss your situation and help you determine the best plan going forward to fix the problem.

Determining Equity In Your Home

Determining the equity in your home is very important in bankruptcy law. Any equity that you have in your home must be exempted in order to protect it from your creditors. So, when you speak with a bankruptcy attorney, they are likely to ask, “how much equity do you have in your home?” What do they mean?

In short, equity is the value of your home minus anything that you owe on it.

The value of your home, at least in the bankruptcy context, is generally the current market value. This can be determined several ways. The most accurate way is to get an appraisal done. This will cost several hundred dollars, but will give the most accurate number. You may also be able to use comparable values listed on real estate websites. If your home was purchased recently and you have not made any major renovations, you may be able to use the purchase price, with a slight increase.

It should be noted that the Bankruptcy Court does not generally except tax assessment values for valuation on homes. This is because tax assessment values are notoriously inaccurate and sometimes are long out-of-date.

Once the value of your home is determined, you must next list all of the mortgages and liens against your home. Your equity is reduced by whatever you owe on the home. Obviously, this would include your first mortgage. It would also include home equity loans and second mortgages. Less obvious, but equally as important, tax liens on your home can also reduce your equity. Judgment liens can reduce it as well. When you deduct all of the mortgages and liens from the value of your home, you will have your current equity.

As an example, imagine that you have received an appraisal of your home that comes back at $200,000. You have a first mortgage of $150,000, a home equity loan of $10,000, and a tax lien of $5,000. In this example, you have a $200,000 home, minus $165,000 in liens. So, you would have $35,000 in equity. This would need to be exempted to protect it from your creditors.

Call us with any questions about bankruptcy or whether or not your home will be fully exempt from your creditors. I would be happy to discuss your situation and and see if I can help.

The Emergency Bankruptcy Petition

The bankruptcy code allows for special emergency circumstances and permits debtors to file an emergency bankruptcy petition when all of the documents which are normally required or not immediately available.

A bankruptcy petition is normally somewhere between 40 and 80 pages of information. Sometimes all of this information is not readily available when a bankruptcy must be filed. An example would be a bankruptcy that needs to be filed in order to stop an imminent sheriff sale or foreclosure. If a debtor waits too long to get to a bankruptcy attorney, there may not be enough time to put together the full petition. Luckily, under the Bankruptcy Code less than the full petition can be filed in order to stop the sheriff sale or foreclosure by applying the automatic stay of bankruptcy.

The automatic stay stops all creditor actions including collections and any legal actions, such as sheriff sales and foreclosures. Therefore, there are times when filing is absolutely necessary. But, what is required to file an emergency petition?

The debtor and his or her attorney must file three things. First, the cover sheet of the voluntary petition must be filed. This includes basic information such as the debtor’s full name, address, and Social Security number. Second, a full creditor matrix must be filed. This means the debtor must submit a full list of all of their creditors. Finally, the first bankruptcy course must be completed and uploaded to the court. This course usually takes about an hour-and-a-half to file, so you must get it done immediately. Once these three documents are filed, the bankruptcy is considered to be started, and the automatic stay will protect you from any creditor actions.

However, it is important to note that the bankruptcy must be completed in full within 14 days, or the bankruptcy will be dismissed. At that point, the automatic stay would be terminated as well, and any legal action against the debtor could continue. So, there will be no time to waste.

If you think you may need to file bankruptcy soon, do not wait to speak with a bankruptcy attorney. Even though the emergency petition can provide bankruptcy relief on short notice, you should not count on an attorney being available immediately before your case needs to be filed. Call us at 412-414-9366 to discuss your current situation and see if bankruptcy is a good option for you.

Protecting Your Vehicle in Bankruptcy

One of the most frequent concerns I hear when someone reaches out to me with questions about bankruptcy is whether or not they will be able to protect their vehicle. Obviously, being able to keep your vehicle is an important issue when you’re considering whether or not to file. Without a vehicle you cannot get to work, pick up your children from school, or even run basic errands.

The good news is that the exemptions in bankruptcy law generally allow you to keep your vehicle when filing. Under the federal exemptions, which can be used in Pennsylvania, $4000 in equity can be protected for your vehicle. “Equity” in the vehicle basically means the Kelley Blue Book value minus the remaining balance of what you owe. If, like most people, you have a monthly payment on a relatively new vehicle, you should not have much equity in your vehicle. That being said, the used car shortage during the past several months of COVID has led to Kelley Blue Book values increasing much more than normal.

If you own your vehicle outright, there could be an issue as to whether or not there is more than $4000 in equity. The good news is that you may also use the “wildcard exemption” which could add up to another $13,900 to protect your vehicle. It will be important to discuss this with your bankruptcy attorney to make sure there will not be an issue.

A couple other notes. The exemption for cars doubles if you are filing jointly with a spouse. If you have motorcycles, boats, RVs, or ATVs, they will need to be exempted separately. Regardless, in the vast majority of cases individuals are able to protect their vehicles in Chapter 7 bankruptcy. Call me at 412-414-9366 if you have any questions or want to set up a free consultation..