Updated Means Test Income

The US Census Bureau Family Medium Income chart will be updated once again on April 1st, 2022. This is important because it helps determine whether or not you can file for Chapter 7 Bankruptcy. Incomes above the threshold (annualized on the chart) are not eligible to for a Chapter 7 bankruptcy, but instead must file a five-year Chapter 13 Bankruptcy plan.

The actual look back period is six months, though the chart as provided by the US Census Bureau is in annualized amounts. Therefore, these numbers can be divided by two to give you an idea of whether or not your gross income for the six months before filing is too much to file Chapter 7 Bankruptcy. The new amounts are as followed:

• Household of one: $60,640.00

• Household of two: $74,805.00

• Household of three: $92,441.00

• Household of four: $110,077.00

• Add $9,900.00 for each individual in excess of 4
  

  Call us at 412-414-9366 to set up a free consultation if you want to know whether or not you qualify for the Chapter 7 Bankruptcy. Many issues go into determining whether or not you qualify, but understanding the means test is a good start.

The Bankruptcy Litmus Test

When a potential client is considering whether or not to file Chapter 7 bankruptcy, I will often tell them about my Chapter 7 bankruptcy “litmus test”. Should you file Chapter 7 bankruptcy, or should you not?

Or, in the most simple form this is the question: can you pay off all of your debt by continuing to do what you are currently doing?

Now, I understand that this seems hopelessly simplistic! And sometimes the answer lies somewhere in the middle, so it’s not completely helpful. But, it really is the best way to go about looking at your situation.

Let’s consider if you answer “yes”. You believe if you continue to do what you were doing, you will get out of your debt. This means that your debt load is manageable given the balance amount and interest rates. In this situation you are paying down the balances on your unsecured debt, and you are able to make your home mortgage and car payments. You’re not falling behind on your taxes, and all of your utilities should be current. If you see your credit card debt balances going down every month, you are well on your way to getting out of your debt!

Now, this does not mean you cannot, or should not, file Chapter 7 bankruptcy if you qualify. If you qualify, it is an option for getting your debt balances back to zero possibly much quicker. Also, even though you are paying your debt down now, you may know that your income will decrease in the future, possibly due to retirement or being laid off. Just because you are paying your debts down does not mean that you are required to NOT file bankruptcy. But, it is a consideration if you wish to avoid it.

Let’s look at the opposite answer to the litmus test. What if you are not paying down your debts? In this scenario you may or may not be paying on your credit cards, but either way the debt balances are not going down. Because of interest and penalties, or because you are only making minimum payments, your total balance due every month is essentially the same. In this scenario you should strongly consider filing Chapter 7 bankruptcy if you qualify. If you’re paying towards your debts and they’re not going anywhere, I call it the “hamster wheel”. Just like a hamster, no matter how fast you move your feet, you end up in the same place at the end of the month. Whatever money you are paying is essentially wasted because it is only covering interest and penalties.

If you believe your income will go up in the near future, or you stand to make a windfall from a lawsuit or an inheritance, you may be able to avoid bankruptcy in this situation. But, if your income looks to be the same going into the future, there probably is no realistic way to pay off your debts. Bankruptcy is always voluntary, of course. But, this is a situation where you should at least strongly consider it, especially if you currently qualify.

If you are not paying your debts down every month and want to consider filing Chapter 7 bankruptcy, contact us at 412-414-9366. I will be happy to go through a free consultation with you to discuss your situation. In many situations the answer will not be clear-cut. You may be lowering your debt balances by small amounts every month, but not eliminating them. I would be happy to talk over the option with you and answer any of your questions!

Leases and Bankruptcy

Any leases you have must be accounted for when filing for bankruptcy. You must either assume or reject your lease in your bankruptcy petition. This includes leases for cars, but also for things such as furniture and real estate.

You must declare your intention so that your creditor knows what you were doing, and know what their rights are. If you’re in Chapter 7 bankruptcy and you wish to continue paying on a lease obligation, you simply assume the lease and continue to make the payments. The bankruptcy automatic stay stops creditors from taking back property. However, if you fall behind on the lease payments after the bankruptcy discharge, they can take the property back. Also, at the end of an assumed auto lease in either chapter 7 bankruptcy or Chapter 13 bankruptcy, you may still be liable for any damage to the vehicle or other fees associated with returning the vehicle. Bankruptcy will not discharge this obligation.

If you wish to get away from a lease in chapter 7 bankruptcy, you simply reject the lease and return the property. You will not owe anything else to the leasing company, including any remaining fees.

In Chapter 13 bankruptcy you must also declare what you want to do with your leased property . The Chapter 13 bankruptcy plan must account for it and pay the lease throughout the duration of the bankruptcy. The lease will otherwise not be affected.

Leased property need not be lost or returned in bankruptcy, but it must be accounted for either by paying the contract terms or returning the property. If you were having trouble with a lease or have general questions about your financial situation, call us at 412-414-9366 to set up a free consultation. I would be happy to discuss these issues with you!

Credit Card Collections

You might be wondering who are these companies that are sending collection notices on my credit card debt? I never borrowed any money from any of them. It’s a good question for a confusing situation.

Credit card companies routinely sell (or assign) debts owed to them by their customers. Unfortunately, this is entirely legal. Credit card debts can be assigned or sold to anyone. This often leads to confusion and makes it difficult for you to determine who exactly you owe. Why do credit card companies sell your debt? If you owe the money, why don’t they try to collect it themselves?

Credit card companies will, in fact, often sell your debts for a small percentage of what is actually owed. They will then write off this loss for tax purposes. Some may conclude that the debt is unrecoverable. Or they may be simply looking to balance their books. Regardless, it leaves you now owing a new, different company. This often results in problems because these companies specialize solely in collections, harassment, and lawsuits., and they are able to go after the entire balance owed on the loan. This is why you may have originally owed Capital One or Discover, but are now being sued by Midland Funding or Portfolio Recovery Associates.

So, what can be done about these collections? The good news is these debts are still eligible to be discharged through bankruptcy. Nothing about the transfer or assignment makes them immune to a bankruptcy filing. Even if they file the lawsuit against you, that too can be discharged through bankruptcy. If you don’t wish to file bankruptcy, these debts can still be negotiated on, possibly for less than the full amount. Keep in mind, these companies have already purchased the debts for less than the full amount and therefore may be motivated to take less than what the original creditor previously wanted.

These collection agencies may make it tricky to figure out who you owe and how much, but they still can be dealt with. Call us at 412-414-9366 if you are being inundated with collection notices. I am an experienced bankruptcy attorney who would be happy to discuss your situation and see if there is an option for dealing with this problem. There almost always is, so don’t despair!

ID in Post-COVID Bankruptcy

The 341 meeting of creditors is a required part of completing bankruptcy. At this meeting you must answer questions asked by a trustee assigned to your case. Occasionally, but rarely, creditors will appear at the meeting to ask you questions as well.

These meetings were previously held in-person at various locations. However, since the beginning of the COVID-19 pandemic, the meetings have occurred virtually over the phone and on Zoom. Chapter 7 bankruptcy meeting of creditors now occur over the phone, while Chapter 13 bankruptcy meeting of creditors occur via Zoom teleconferencing. In either case, your attorney will provide you with the links necessary to join the meetings.

In almost every way the meetings are conducted the same as they were when they were done in person. The trustee swears you in, you attorney enters their appearance, and the trustee asks you a series of questions. One thing that has changed is that your bankruptcy attorney must now identify you using your Social Security card and a valid state photo ID. Previously, these documents were reviewed and verified by the trustee assigned to the case. Now, you must provide these documents to your bankruptcy attorney so that he or she can verify them for the trustee.

Most trustees will accept an unredacted W-2 in lieu of your original Social Security card. State photo IDs can include drivers licenses, military IDs, and state issued IDs. Things such as membership cards with a photo are generally not excepted. They must be state issued.

Your attorney should go over all of the steps necessary to join the virtual meeting of creditors and prepare you for all the questions that will be asked. If you have any bankruptcy or credit related issues, call us at 412-414-9366. I will be happy to set up a free consultation to discuss your situation!