Employment Status and Bankruptcy

I get a lot of questions about employment status and how it affects a person’s ability to file bankruptcy. There are a lot of scenarios that could come up, but I would like to at least provide a brief overview.

People will ask whether they need to be employed to file a bankruptcy, or conversely, if current employment is a problem with filing. Generally, when speaking about Chapter 7 bankruptcy, being unemployed is not a problem unless you have secured debt which you were trying to keep current. The secured debts that are most important are mortgages and car payments. If you want to keep either of these payments through chapter 7 bankruptcy, you have to be able to show the court that you can afford to do so. This normally requires you to have income and a job. However, if you have a non-following spouse or relative who is making the payments, or you have non-employment income such as Social Security, a pension, or even unemployment, you should be able to keep your secure debts such as a car or home through bankruptcy.

In chapter 13, not having employment can be a problem for the same reasons. In chapter 13 bankruptcy you are required to make a monthly payment to the United States Trustee. Just as above, this is normally more possible if you have regular employment. But if, you have the other types of household income that I mentioned above, Chapter 13 bankruptcy may still be feasible.

The bottom line for filing bankruptcy is that there needs to be money coming in to either support a Chapter 13 bankruptcy payment or to keep secure debts in a Chapter 7 bankruptcy. That money coming in doesn’t necessarily need to be regular employment.

Now, if you have too much employment (that is, you earn too much money) it could be an issue with filing Chapter 7 because it may push you above the means test threshold. I discuss the means test extensively elsewhere in this blog and won’t go over it here. But, if you are working it will be important to know exactly how much you are earning.

Finally, in some scenarios it will be important for your bankruptcy attorney to know if you will be losing your job in the near future. If you are losing your job, you may not be able to support a Chapter 13 bankruptcy that you are planning to file. Also, if you are losing your job, you may be able to get beneath the means test and file Chapter 7 bankruptcy by waiting a bit longer.

Call us at 412-414-9366 if you have any questions about bankruptcy and your employment status. I would be happy to set up a free consultation and discuss your situation!

Post-Holiday Debt

The period after the holidays and leading into Spring is normally the busiest time of year for bankruptcy attorneys.

It makes sense in a lot of ways. First of all, not many people want to deal with debt and credit issues during the holidays. Which is entirely understandable. So, it is often put off until the next year sometime after New Year’s.

Another reason it is a busy time of year is because people will make resolutions to clear up their debt and credit issues. A fresh year is a good time for a fresh start. I have many new clients during this time of year who will say as much.

A less obvious reason that this is a busy time of year for bankruptcy filings is that many people are able to use their tax refunds to pay the filing fees and costs. Some clients on payment plans are able to finish them up once they receive their tax refund. You tax refund may be earmarked for repairs, household expenses, or utilities. But, using it to file bankruptcy may make your entire year easier and less stressful.

The most unfortunate reason that bankruptcies pick up in the Spring is that foreclosure actions tend to spike during the Spring. This may be especially true in 2022 as mortgage companies are once again allowed to foreclose on homes after the lengthy COVID moratorium. A Chapter 13 bankruptcy is a great way to stop a foreclosure. It allows you to catch up all arrears and fees spread out over 3 to 5 years. Even more importantly it will stop a foreclosure or even a sheriff sale up until the final moment of the action. Your home need not be in danger.

All of these reasons tend to cause bankruptcies to increase at the beginning of the year. However, it’s no reason to despair. As mentioned earlier, New Year’s is a great time for a fresh start. With the holidays behind us it is often times a good moment to get our affairs in order. If you’ve been considering filing bankruptcy, but put it off because of the holidays, call us at 412-414-9366 to set up a free consultation and see if it’s a viable option for you. The new year is a great time to end the stress related to creditors and collection actions.

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.

Can You Get A Car In Chapter 13 Bankruptcy

Chapter 13 bankruptcy typically runs three-to-five years. During this time, cars can die and break down. A common concern for Chapter 13 filers is whether or not they can get a new car loan after filing. The answer is "yes", but there are some limitations.

In order to finance a vehicle in Chapter 13 bankruptcy, the attorney of the filer must get Bankruptcy Court permission to do so. This is done by filing a motion and getting a signed court order. You should give your attorney as much heads up as possible that you will need a new car, as preparing this motion can take some time, and the court will need to review it, even if it is filed on an expedited basis. Don't call your attorney at the last minute. You should give him or her a month of notice, if possible.

What will the court consider in deciding whether to allow someone to finance a vehicle in bankruptcy? First, they will need to see that payments in the bankruptcy case are current. If you are behind on the payments, the court will not allow you to take out new debt, no matter how badly you need the car. If you are behind a couple payments, you will need to catch them up.

Second, the court will need a reason that the new car is needed. It doesn't need to be anything dramatic or long-winded. Typical reasons include your old car permanently breaking down or a change in life circumstances that would require a new car (for instance, taking a job outside of the bus line). The court will probably not accept the request if the reason is that you don't like your car, or you want a nicer car. It has to be a necessity.

Third, the court will place limits on how much you can finance, regardless of how much you make. The current limits are $25,000 total financed, and/or a payment no larger than $400 per month. This may limit what you want, but it is likely non-negotiable with the court. A large finance payment will not be permitted.

Once the court grants your motion, you will need to find a dealership that is willing to finance through Chapter 13 bankruptcy. They exist, but they will likely charge a very high interest rates, and you may need to shop around. The interest rates are sometimes over 20%, which can make a car prohibitively expensive in Chapter 13 bankruptcy. For this reason, it is almost always preferable to try and make it through your Chapter 13 bankruptcy with your original car.

After securing financing, a second motion must be filed with the court approving the loan. As mentioned earlier, the court will only approve the financing if it is for less than $25,000 and less than $400 per month. Once this motion is approved, your bankruptcy plan must be amended to incorporate the new payment. Obviously, it will need to be an amount you can afford. You will need to make the payment directly until the payment is made by the Trustee.

If you are married, and only one spouse needs to file, the non-filing spouse may secure financing outside of bankruptcy. This will be much easier, and it will not require you to include it in the bankruptcy. This is something to keep in mind when filing.

You can buy a car in Chapter 13 bankruptcy when the need comes up. But, it must be necessary, and there will be limits to what you can buy. If you are considering bankruptcy and believe this may be an issue, contact us to set up a free consultation.

Chapter 13 Bankruptcy Timeline

Every bankruptcy case is different, especially so for Chapter 13 bankruptcies. However, a common timeline runs through nearly every case. Knowing this outline helps my clients to better understand the process and requirements. Here is a brief overview of the important moments in a Chapter 13 bankruptcy.

The first important moment is the filing of the case. This occurs after all the necessary paperwork and documents have been provided, and a Chapter 13 plan and petition are filed. However, an "emergency petition" can be filed when necessary, allowing the case to be filed before everything is ready. When an emergency petition is filed, all the necessary documents and papers must be filed within 14 days. This is a very important deadline, because the case will be dismissed if it is not met. Therefore, it is important to not file an emergency petition unless absolutely necessary. When a case is filed under normal circumstances, your attorney should file everything within a few days and get nowhere near any of the deadlines.

When the case is filed, a Chapter 13 Meeting of Creditors will be scheduled for (roughly) four-to-six weeks later. The meeting of creditors is discussed in more detail elsewhere in this blog. However, it is only important to note here that appearance at this meeting is mandatory. You will generally be allowed to reschedule once. Missed appearances after that threaten the case being dismissed. It is advisable to make sure you have made the first payment in your plan by the time this meeting is held.

A second hearing, called a "conciliation conference" will be scheduled at the meeting of creditors. You will not be required to attend this hearing. Your attorney will amend your plan (if necessary) in the weeks before this hearing. This will occur if there are new claims to be accounted for or objected to, or if corrections need to be made to your plan. Assuming the amended plan is accepted, the bankruptcy case will be approved on a final basis at this hearing. If not, additional amendments can be made. After the planned is confirmed, you only need to make sure all of the payments are made on time.

Assuming all goes well with the case, the final requirements will occur at the end, or closeout, of your case. You will need to complete the second bankruptcy course, and review a motion with your attorney attesting that you have completed all of the requirements in your case. You won't need to make an appearance, but you will need to be in touch with your attorney. Once the case ends, you may need to start paying your mortgage again. Your attorney will explain the closeout procedure.

Contact us if you are considering filing a Chapter 13 bankruptcy and wish to review the process in more detail. We can set up a free consultation to discuss your situation in detail.