"C" is for Credit Card Creep

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Many prospective clients, when meeting me for the first time in my office, seem to shake their heads and wonder what happened with their finances. They say that they never imagined that they would be considering bankruptcy.  I don't know the percentages, but the financial problems of most people are rooted in the following:

• divorce or separation
• job loss
• medical bills or medical problems

"B" is for Bankruptcy Timeline

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The timeline for a typical bankruptcy case is as follows.  I will talk mostly about Chapter 7 and Chapter 13 bankruptcy, because business bankruptcies in Chapter 11 vary considerably.

Both Chapter 7 and Chapter 13 cases begin as follows.  Prior to filing a case, one must complete the Pre Filing Counseling, which takes from 30 to 60 minutes.  Most people complete the Counseling online, but some opt to do it by telephone.  In any event, the Counseling must be done at some point in the 6 month period prior filing the case.  One you thoroughly read over the bankruptcy petition, schedules and statements, your case can be filed and you will be assigned a case number.  Moreover, the automatic stay of the bankruptcy will go immediately into effect, so that you are protected from any collections activity.

Generally, within about 3 or 4 days, the Court will schedule the 341 Meeting of Creditors date and will mail the meeting notice to everyone associated with the case.  That meeting will take place approximately 30 to 45 days after the case filing date.  At the meeting, debtors are required to answer questions under oath from the Chapter 7 Trustee about their debts and property.

Following the meeting, in most cases, the Trustee will file a report with the Bankruptcy Court which indicates that the Trustee has completed his or her review of the case and that there are no assets to administer.  Provided that the debtor has completed his or her Financial Management (aka Financial Education) course within 60 days of the Meeting of Creditors date, then the Court may issue a discharge order, which officially wipes out the debts.  That course, by the way, takes approximately two hours and is usually completed online, although there may be an in-person course in your area.  In any event, the discharge order and final report, both of which formally close out the case, are entered at some point after a 60-day period has expired after the Meeting of Creditors.

Chapter 13 cases are a bit different, because they run for 3 to 5 years.  Importantly, a Chapter 13 debtor must begin making his or her Chapter 13 plan payment within the first 30 days of the case.  Chapter 13 procedures vary considerably from state to state, however, the Meetings of Creditors will usually be conducted within 30 to 45 days after filing date, but in most jurisdictions, the Chapter 13 plans won't be confirmed on a final basis until approximately 5 months following the original filing date of the case.    This is done so that creditors are permitted a reasonable period of time in which to file their own paperwork (known as proofs of claim).   That period of time is usually about 5 months.

In any event, once the Chapter 13 plan is confirmed, then payments are made until the required Chapter 13 plan base (total amount of money required to be paid during the 3 to 5 year period) is met.  At some point prior to the end of the case, one must complete the Financial Management course as well, and there must be filed a certificate of eligibility for Chapter 13. The Chapter 13 Trustee will review the payment history in the case to ensure that the necessary claims have been paid to comply with the confirmed plan, but after that review is done, then the Court will issue the discharge order as well.

If you have particular questions that are more detailed, please let me know.

Here are more B's in the Bankruptcy Alphabet:

Bad Faith Filing by Miami Bankruptcy Attorney Dorota Trzeciecka;

Bailout by Jacksonville Bankruptcy Attorney Monica D. Shepard;

Bank Account by New York Bankruptcy Attorney Jay S. Fleischman and by Chicago Bankruptcy Attorney Daniel J. Winter here;

Bank Account Levy by Philadelphia Bankruptcy Attorney Raymond Kempinski;

Bank Tips by Wisconsin Bankruptcy Attorney Bret Nason;

Bankruptcy by Taylor Michigan Bankruptcy Attorney Christopher McAvoy;

Bankruptcy Estate by Metro Richmond Consumer and Bankruptcy Attorney Mitchell Goldstein;

Bankruptcy Mill by Chicago Bankruptcy Attorney Kyle Lindsey;

BPPs by Colorado Springs Bankruptcy Attorney Bob Doig;

Bankruptcy Petition Preparers by Los Angeles Bankruptcy Attorney Christine Wilton;

Bar Date by Ormond Beach Florida Bankruptcy Attorney Lewis Roberts; 

Best Interests of Creditors by Honolulu Bankruptcy Attorney Stuart Ing;

Beware of these Credit Card Offers by Marin County Bankruptcy Attorney Catherine Eranthe;

Borrow by San Francisco Bankruptcy Attorney Jeena Cho;

Business by Omaha and Lincoln Nebraska Bankrutpcy Attorney Ryan Caldwell and here by Northern California Bankruptcy Attorney Cathy Moran;

Business Bankruptcy for Individuals by Philadelphia Suburban Bankruptcy Attorney Chris Carr;

Business Bankruptcy by Los Angeles Bankruptcy Attorney Mark J. Markus;

Businesses and Business Debt by Newnan Georgia Bankruptcy Attorney Rick Palmer and

Buy Low and Sell High by Cleveland Area Bankruptcy Attorney Bill Balena

"A" is for Abuse of Bankruptcy

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In the Bankruptcy Alphabet, "A" stands for abuse of bankruptcy.  Clients frequently ask me if their bankruptcy case is going to be approved by the Court.  My answer is yes, as long as they follow the rules of the court.

I write this today having just read that the Bankruptcy Court has dismissed the Chapter 13 case of T-Boz, the female rapper, who filed a case after incurring $768,000 in debts.  Apparently, she failed to attend her Meeting of Creditors and failed to make her required Chapter 13 plan payments.  So, her Judge dismissed her case with prejudice, which means that she cannot file a new bankruptcy case for 180 days.   In the meantime, her creditors will be able to pursue her and she will be unable to obtain bankruptcy protection.

Without writing a comprehensive list of do's and don'ts for bankruptcy court conduct, the cardinal rule is to simply disclose information concerning income, assets and debts to your attorney.   The failure to disclose can lead to your case being dismissed (serious omissions can lead to being prosecuted for bankruptcy fraud, but that's another story).

On the other hand, bankruptcy judges and trustees can be forgiving.   Just two days ago, a Chapter 13 client of mine called to say that he was really sick and that he couldn't attend his Meeting of Creditors scheduled for next week.  No problem.  I got the permission of the Chapter 13 Trustee to postpone his Meeting and filed a request with the Court to postpone the Meeting.  It took me two days and the Court has already re-scheduled it.

That particular client, however, had made his first Chapter 13 plan payment, and the Trustee knew it.   If you simply don't show up for Court and you don't make your plan payments, well, you might end up like a certain female rapper with a whole lotta debts to her name.

More on the Bankruptcy Alphabet from around the country:

Abandonment from New York Bankruptcy Attorney Jay Fleischman;

Abuse from Wisconsin Bankruptcy Attorney Bret Nason;

Advantages from Columbus Bankruptcy Attorney Athena Inembolidis;

Adversary Proceeding from Philadelphia Bankruptcy Attorney Kimberly Coleman;

Alimony from Philadelphia Suburban Bankruptcy Attorney Chris Carr;

Application from Los Angeles Bankruptcy Attorney Christine Wilton;

Arrest from Cleveland Area Bankruptcy Attorney Bill Balena;

Ask from San Francisco Bankruptcy Attorney Jeena Cho;

Assets from Hawaii Bankruptcy Attorney, Stuart Ing;

Assets from Jacksonville Bankruptcy Attorney, Monica D. Shepard;

Assets from Marin County Bankruptcy Attorney, Catherine Eranthe;

Assets from Metro Richmond Bankruptcy and Consumer Attorney, Mitchell Goldstein;

Assume from Northern California Bankruptcy Attorney, Cathy Moran;

Assumption from Los Angeles Bankruptcy Attorney, Mark J. Markus;

Assumptions from Newnan Georgia Bankruptcy Attorney, Rick Palmer;

Assumption from Michigan Bankruptcy Attorney, Christopher McAvoy;

Attorney from Chicago Bankruptcy Attorney, Daniel J. Winter;

Automatic Stay from Chicago Bankruptcy Attorney, Kyle A. Lindsey;

Automatic Stay from Connecticut Bankruptcy Attorney, William E. Carter; 

Automatic Stay from Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan Caldwell;

Automobiles from Colorado Springs Bankruptcy Attorney, Bob Doig, and

Amendment from Miami Bankruptcy Attorney Dorota Trzeciecka.

"I" is for Insurance--the Bankruptcy Alphabet

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In the bankruptcy alphabet world, "I" is for insurance.   Specifically, I'm talking about force-placed insurance.  Never heard of it?  Well, it's a huge money-maker for mortgage servicing companies and it's a nasty way for a homeowner to lose a lot of money.   It's also one way you can get your Chapter 13 bankruptcy case dismissed.

Here's what happens:  if you're a homeowner with a mortgage and you fail to pay your homeowners insurance premiums, your insurance company will drop your coverage.   Your mortgage company will soon find out and it will should send the homeowner a notice of lapsed coverage.  The notice will advise the homeowner to go back and get coverage or else the mortgage company will purchase its own.    This kind of coverage is called "force-placed insurance".

Think this is no big deal?   Well, you're wrong.  It's a huge deal and it's all bad for the homeowner.  The average homeowner may pay an insurance premium of perhaps $70 per month.   The average force-placed policy will cost between $150 and $250 per month.   And the mortgage servicer might purchase it, but guess who gets stuck with the bill?   Eventually, of course, it's the homeowner.

The second problem is once the force-placed insurance coverage is implemented, the homeowner isn't covered!   How can that be?  Well, force-placed insurance only covers the mortgage company's loss, not the homeowner's.   So, if your house burns down, sorry, the mortgage company will get paid, but not you!

Finally, if you're in a Chapter 13 bankruptcy and you lose your homeowners coverage, then your case may be dismissed.  Why?  Because the bankruptcy estate isn't protected.  A debtor has a duty to protect his or her property for himself or herself, but also for the benefit of the creditors.  If your house burns down and you don't have proper coverage, then no one gets paid other than the mortgage company.

Comment below if you've got questions!

Here are more suggestions to the Bankruptcy Alphabet:

Here's In Forma Pauperis from Colorado Springs Bankruptcy Attorney Bob Doig

Here's Income from New York Bankruptcy Attorney Jay S. Fleischman

An Income from Marin County Bankruptcy Attorney Catherine Eranthe

Here's Income Tax Refund from Michigan Bankruptcy Attorney Christopher McAvoy

Here's Independent Contractor from Big Island Bankruptcy Attorney Stuart Ing

Here's Insiders from Los Angeles Bankruptcy Attorney Mark J. Markus

And Insiders from Metro Richmond Bankruptcy Attorney Mitchell Goldstein

Here's Insolvency from Wisconsin Bankruptcy Attorney Bret Nason

Here's Instant from San Francisco Bankruptcy Attorney Jeena Cho

Here's Involuntary Bankruptcy from Cleveland Area Bankruptcy Attorney Bill Balena

Here's Involuntary Petition from Omaha and Lincoln, Nebraska Bankruptcy Attorney Ryan Caldwell

Here's IRA from Philadelphia Suburban Bankruptcy Attorney Christopher Carr

Here's IRS from Northern California Bankruptcy Attorney Cathy Moran

10 Tips for Success in Your Chapter 13 Case

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So, you filed a Chapter 13 case and your Chapter 13 plan has been confirmed by the Court. Your goal at this point is to pay off the total amount in your plan, also known as the plan base.  Here are ten things to prepare for:

1)  complete your Pre-Discharge Financial Education course and establish a good budget;

2)  make sure that you've listed all of your creditors;

3)  defend yourself against creditors who communicate with you;

4)  pay attention to letters sent to you by your mortgage company;

5)  stay up to date with your utility payments;

6)  keep your vehicles in good condition;

7)  pay your homeowners insurance premiums, and watch out for force-placed insurance;

8)  if you pay your own real estate taxes, then stay up to date with them;

9)  if you're self-employed, then try to keep your payments as consistent as possible, and

10)  if your circumstances change, then you should report the changes to your attorney. 

In the coming weeks, I'll address each of the following tips in more detail.   More to follow.

4 Ways how Bankruptcy can help you modify your Mortgage Loan

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I was recently in Bankruptcy Court in Pittsburgh on a Chapter 13 case.  It was a difficult case, in which the client was over $20,000 behind on his primary mortgage.  My client could afford to make his regular mortgage payment, but to pay that in addition to such a high percentage of arrears was too difficult for him.

He really needed a loan modification from his mortgage company, but they weren't cooperating.   I knew that the Bankruptcy Judge couldn't force the mortgage company to modify the loan, but lo and behold, in the middle of our hearing, I caught the mortgage company's lawyer in a whopper of a lie.   Mind you, I don't think that the lawyer lied, but he was merely misinformed by his client.   He had been told that my client had NEVER contacted them to speak about a mortgage modification.

At that point, I merely pointed out to the Judge that my client had been keeping a log of all of his phone and fax communications with the mortgage company and he was averaging 2 to 3 phone calls per week over the past 3 months.  (Hint:  if you're not calling your mortgage company that often, you probably won't get anybody's attention for a modification!).

What happened next was a nice victory.  The Judge got mad at the mortgage lawyer and told him that an actual representative of the mortgage company, a-hem, Chase, had to appear at the next person, and never mind if he had to fly in from California.

So here are four ways that the supervision of a Bankruptcy Judge can help in getting your loan modified:

1)   the Judge can order the mortgage company to provide records and to actually communicate with your client;

2)  your lawyer can communicate with the mortgage company's lawyer and help you in getting necessary information;

3)   the Judge can approve the final loan modification pursuant to a court order, and

4)  being in a Chapter 13 case forces you to make regular payments to the Trustee. This prevents you from falling even further behind on your mortgage loan.  This helps you in a long run!

So, what happened in my case?  Well, we're still fighting with the mortgage company, trying to get a loan modification.   Loan mods do happen, either through HAMP or traditional means, but they're tough to get!   Good luck to you if you're trying!  Keep up the fight.

Happy Thanksgiving!

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My favorite holiday is Thanksgiving.   It comes at a good time and it gets me to reflect on friends and family and the things that are going well.  Sure, the food is good too, and it's fun to get together with folks, but what I appreciate is the time to reflect.

So, what does this have to do with bankruptcy law?  Many times when I meet with new clients, they're racked with guilt and anxiety about letting down their creditors.  I have to remind them that it's not like they're going to get much sympathy or love from the executives at the credit card companies.

Most clients who come into their first consultation in my office are there for a reason;  deep down, they know that their debt situations are grave and that they should consider bankruptcy.

Most times too, I can see how bankruptcy will absolutely improve their financial situations. The vast majority of the clients I see will be able to protect all of their property, wipe out their debts and rebuild their credit ratings.

The majority of my clients have had some unfortunate event in their lives.   For some, it's a job loss; for others, it's a major medical problem or a divorce or separation.   It's simply not their fault that they have become riddled with debt problems.

Thus, if you're considering bankruptcy, you can't play the blame game.  I tell clients that they're not permitted to kick themselves about their debts.  Instead, folks can improve their financial bottom line and credit rating by getting debt relief and a fresh start.   They can take the financial management course (two hours long) that's required in every bankruptcy case.

My thanks for the opportunity to have worked with so many great clients!   Happy Thanksgiving to all.

6 Steps on Getting a Car Loan While in a Chapter 13 Bankruptcy Case

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Okay, there you have it!!   I will start screaming if I hear about another car salesman telling one of my Chapter 13 clients that "all you need is a letter from the Trustee saying the car loan is approved".    

News Flash to All Car Salesman of Western Pennsylvania:   the Chapter 13 Trustee doesn't issue letters like that.   Don't ask them.  They won't do it.

Here's why:   the Court Rules in the Bankruptcy Court for the Western District of Pennsylvania require that the debtor seek approval from the Judge in their case.   So, it's my job to do this for my client.

Here are those steps:

1)  first, go to a dealership and see what types of cars suit your needs and are affordable;

2)  be honest with the car salesman and tell them that you are in a Chapter 13 bankruptcy case.   They'll find out anyway when they run your credit report;

3)  tell the salesman that you need to provide your attorney with the hypothetical monthly payment, interest rate and total amount to be borrowed;

4)  get me that information, because I will need it in the court motion that I have to file with the Court.   By the way, it will take about 2 to 5 weeks for the Court to hear that motion.   If you are truly in a state of emergency (let's say that your car has just been totalled), then I can schedule the hearing as an "emergency" hearing and it might be scheduled within 2 to 3 weeks;

5)  unless you are seriously delinquent with your existing plan payments or you are looking to borrow money for an unnecessarily-expensive vehicle purchase, then the Judge in your case will invariably approve your loan;

6)  once the Judge signs the Order of Court which approves your loan, then you can return to the dealer to finalize the purchase.    Another Local Rule in our Bankruptcy District however requires that all post-petition loans be paid through the Chapter 13 plans.   So, we will have to amend your Chapter 13 plan in order for the new car lender to be paid through the Trustee's Office.   Not all creditors like this arrangement, because it will require them to wait approximately 3 months before being paid.   Nevertheless, that is our Local Rule and unless you obtain a waiver from your Judge, you'll have to pay the car loan through your new Chapter 13 plan.

Good luck and I never want to hear from another car salesman about a "letter from the Trustee". . . .

I just moved to Pennsylvania. Can I file bankruptcy here now?

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I frequently get calls from people who have recently moved to the Pittsburgh area and want to immediately file a bankruptcy case.

They are generally impatient to file a case, but I have to caution them that they must follow the rules on where to file their case.   The Bankruptcy Code requires that an individual can only file a bankruptcy case in the State in which they have resided the most over the past 180 days.

In other words, for most people, that would require them to wait 91 days after they've moved to Pennsylvania in order to file.

Unless you've got a true emergency, then it shouldn't be hard to wait 3 months to file.   Once you retain a bankruptcy lawyer, then that lawyer should contact all of your prospective creditors to inform them that a case will be filed shortly. Moreover, you can use that time to help your attorney prepare your case.   Your attorney will need to obtain copies of your last two tax returns, your recent bank statements as well as your last six months of paystubs.

One wrinkle in the Bankruptcy Code now is that the Court Trustee will be permitted to apply the exemption laws of the other states in which you've resided in the past 3 years.  Bankruptcy exemptions refer to the laws that permit you to protect and retain your property, and those laws differ a great deal from State to State.   The exemptions that we use in Pennsylvania are reasonably generous, so your lawyer will need to research the exemption laws in the other states in which you've resided in the past 3 years.

Let me know if you have a question or comment!

How to Protect your Retirement Plan by Filing Bankruptcy

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One of my pet peeves as a Pittsburgh bankruptcy attorney is not using one's retirement funds to pay off debts.  

My big objection is that those funds are supposed to be used for your retirement, not for your supposedly productive earning years.  I can, however, understand that people can have financial problems and that a 401k loan could possibly help overcome a specific problem.

Generally however, your retirement plan, (and this would have to be a tax-qualified retirement plan, such as a 401k plan or IRA), is going to be protected from your creditors.   In Pennsylvania, this is going to be the case whether you file for bankruptcy relief or not.

So, once you borrow from your 401k to pay your creditors, here are the five likely things that will happen:

1. you are probably going to "throw good money after bad".  In other words, you won't be able to pay your debts in full from your retirement funds;
2. you will be left without any retirement plan at all, or at least, a greatly-reduced one;
3. to reconcile your 401k plan, you will have to either begin to repay the loan within 60 days, and I never cease to be amazed at how expensive the repayment terms are, or
4. if you fail to repay the 401k loan, then you will have to pay taxes on the amount of disbursed funds.  So, make sure to save some money to pay those taxes!   You may have simply bought yourself a future problem with the IRS.
5. you're going to get a headache when you realize that you could have protected your entire retirement plan in the event that you filed bankruptcy.  Specifically, Section 522(d)(12) of the Bankruptcy Code gives you the right to protect qualified tax accounts.   If you have other questions or concerns, please contact my office to discuss.