Answers to Questions on Bankruptcy and Social Security Disability
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What if I am making payments in a Chapter 13 Bankruptcy and an unusal circumstance occurs that makes me unable to make payments any longer?
There may be times when a debtor is making payments through a Chapter 13 Plan, then all of a sudden he or she is hit with a particular set of events that makes it almost impossible to complete their Chapter 13 repayment plan. The Bankruptcy Code provides for the filing of a motion seeking a hardship discharge in these type of circumstances. Of course the ability to receive a hardship discharge is not without limitation. The debtor must show the following:
1) The failure to complete your Chapter 13 plan payments are due to circumstances "for which you should not be justly held accountable" (These circumstances do not need to be catastrophic or the "truly worst of the awfuls", but it is necessary to present evidence more than simply unsubstantiated and conclusory statements of the debtor's inability to complete the Chapter 13 Plan. A severe deterioration in the debtor's financial circumstances may possibly be sufficient, whereas a temporary loss of a job would not be);
2) That unsecured creditors have received at least as much as they would have received if the debtor had filed a Chapter 7 Bankruptcy (Oftentimes, a debtor might have to file a Chapter 13 Bankruptcy because they have property that they are unable to exempt. This would mean that it would be necessary to pay unsecured creditors at least the value of the nonexemt property because had the debtor filed a Chapter 7 Bankruptcy this property would have been liquidated and the unsecured crditors would have received at least the value of this property. This being the case, a hardship discharge would more likely be granted near the completion of the Chapter 13 Bankruptcy); and
3) Any modification of the Chapter 13 Plan simply would not be practticable.
A Chapter 13 Bankruptcy is generally anywhere from three to five years. In order to receive a hardship discharge, it is first necessary that the Chapter 13 Plan has been confirmed. The type of discharge that the debtor receives is similar to that received in a Chapter 7 Bankruptcy, whereas the discharge that is received in a Chapter 13 Bankruptcy is somewhat broader. If a hardship discharge is granted only unsecured and nonpriority debts are wiped out. The debtor still remains legally liable for any secured or priority debts. One other point worth noting is that upon the completion of a Chapter 13 Bankruptcy the debtor is required to certify that all domestic support obligations, such as child support, spousal support or alimony have been made. This is not a requirement to receive a hardship discharge. Otherwords, no certification regarding the payment of domestic support obligations is necessary.
So if you find yourself facing similar circumstances or you have any unanswered questions regarding bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form and we will immediately contact you to schedule a free consultation.
Are the deposits of money that I have in my checking account safe upon the filing of my bankruptcy?
UPON FILING BANKRUPTCY, ANY BANK OR FINANCIAL INSTITUTION STILL MAINTAINS ITS'
COMMON LAW RIGHT OF SET-OFF
Oftentimes a person may have a deposit of money in their checking account at the time that they file bankruptcy. The question that arises is whether those monies are safe? The Bankruptcy Code provides the bank with what is known as a set-off. A set-off is when a creditor, often a financial institution, retrieves the money from the debtor's account to pay a debt owed to that creditor by the debtor. The automatic stay that comes about upon the filing of bankruptcy prohibits the set-off of any debt owed by the debtor that arose prior to the commencement of the case in which a claim could be made against the debtor. Generally, creditors may not engage in any type of collection activity to coerce the payment of a prepetition debt. However, an exeception to the rule is that a freeze on a debtor's bank account, by a bank that a debtor owes money to, is not considered a set-off that is prohibited by the automatic stay. The catch is that it must be a temporary freeze. A temporary freeze is permitted to allow the creditor to obtain relief from stay in order to exercise its' right of set-off. A permanent freeze without seeking relief from stay would clearly be a violation of the provisions of the automatic stay.
THE RIGHT OF SET-OFF MAY STILL BE DEFEATED IN THE CONTEXT OF YOUR
Even though a bank or financial institution might have a right of set-off, there are certain situations in which that right may be limited, or even defeated:
1) It has clearly been determined that if a debtor has a plan confirmed in their Chapter 13 Bankruptcy and provides for a different treatment of the claim, then any set-off or freeze is prohibited. For instance, a set-off by the IRS would be prohibited after the confirmation of a Chapter 13 plan that has provided for payment of the debt through the plan.
2) A typical situation situation that alot of debtors find themselves in is: 1) One of their debts is from a credit card issued by a bank that they have deposits with. The bank is prohibited from setting off funds that the debtor may have deposited with the bank, or 2) A debtor may have a consumer line of credit with the bank. Likewise, the bank is prohibited from placing any freeze or set-off on any funds on deposit with the bank.
3) Even though a debtor files bankruptcy, he or she is still considered to have an interest in any funds that are deposited in any account. The issue becomes whether the debtor's right to exempt those funds are superior to the bank's right of set-off. The bank is basically a general unsecured creditor, but it is subject to the debtor being able to exempt any funds that might be on deposit. However, the bank's right of set-off gives it a right that takes priority over any other creditor's claim to any funds on deposit. The majority view, which includes the Bankruptcy Court for the Western District of Pennsylvania, is that property which the debtor has been able to exempt, is not subject to set-off. Any funds that exceeds the amount that was able to be exempted may be set-off against the account.
4) Any bank or financial institution is prohibited from setting off any debt by seizing Social Security Benefits.
5) There is no right of set-off by the bank of any pre-petition debts against post-petition deposits in an account. Otherwords, only funds on deposit at the time of filing bankruptcy may be subject to being set-off. Any funds deposited after a bankruptcy is filed are safe and are not subject to set-off.
6) An exception to the automatic stay permits the IRS to set-off a pre-petition tax refund against a pre-petition tax debt. The exception is only for taxes that you owed prior to filing bankruptcy. Any tax refunds that become due postpetition are not subject to being set-off. For instance, if you are in a Chapter 13 Bankruptcy and become entitled to any tax refund for any of the years after your initial filing, then the IRS is prohibited from attaching those refunds.
Prior to filing for bankrptcy, if a person faces circumstances that may subject their funds to being seized by the bank or a financial institution, then the best way to prevent the freeze or set-off is simply to deplete the account.
If you find yourself in a similar type of situation or have any other questions about filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd today at 412 471-9670 or fill out our online contact information form and schedule a free consultation.
Just what is the reaffirming of a debt in your bankruptcy?
A person files a bankruptcy with the idea of getting rid of all of their unsecured debt. However, a person has the option of reaffirming a debt or entering into what is known as a reaffirmation agreement. The consequence of reaffirming a debt is that the debt is no longer wiped out by the bankruptcy and that the debtor will remain legally obligated on the debt despite the bankruptcy filing. Since you remain legally obligated on the debt, that means that you could continue to receive collection calls or be sued in court and possibly have your property attached if you fall behind on your payments. That being the case, it is seldom a good idea to reaffirm a debt. There still can be legitimate reasons why a person might want to reaffirm a debt: 1) to keep collateral that secures a debt (There could be times where a person falls behind on payments on a secured debt and the debtor does not want to pursue or convert their case to a Chapter 13 Bankruptcy. In exchange for signing a reaffirmation agreement, the creditor may agree to a payment plan on the delinquent portion of the debt and agree not to pursue collection activities, such as repossession), 2) maintain credit privileges or to improve your credit record (The creditor will most likely no longer provide a person with payment coupons, any statements related to the account or continue reporting any payments to the credit bureau if the debt has not been reaffirmed).
CAR LOANS ARE THE TYPE OF DEBTS THAT ARE THE PRIMARY FOCUS OF REAFFIRMATION AGREEMENTS
Reaffirmation Agreements play a role in Chapter 7 Bankruptcies, but are not a part of Chapter 13. The primary focus is on consumer debts or automobile loans secured on your vehicle. The Bankruptcy Code was amended back in 2005. One of the changes was that if a debtor did not sign a reaffirmation agreement, then the lender would get an automatic relief from stay and could repossess the vehicle. The creditor very seldom pursued this option. Every case was looked at on an individual basis. Such things as the year and the value of the car were considered. In any event, state law oftentimes protected a person's car from repossession, as long as the person was current on the payments. Signing a reaffirmation agreement or reaffirming the debt on your car can be a good thing if you can afford to make the payments. This can be a good way of rebuilding your credit and maintaining a good relationship with that particular lender should you want to purchase another car through them. If you are not able to make the payments or making the payments puts you in a difficult situation, then signing a reaffirmation agreement is probably not a good idea, as it can pose a major danger or risk. This debt is no longer discharged in your bankuptcy and should the creditor repossess the vehicle, then you can be held liable for the difference or deficinecy that remains on the debt after the sale of the vehicle. If you find yourself in this situation, then simply continuing to make the regular monthly payments on the debt, better known as the ride through is probably the best option for you. Even though you are not able to use entering into a reaffirmation agreement as a way to re-build your credit, you are still able to keep and use your car.
REAFFIRMATION AGREEMENTS ARE REQUIRED TO CONTAIN CERTAIN INFORMATION
The Bankruptcy Code requires reaffirmation agreements to comply with certain terms in order to be in compliance:
1) must be in writing (The agreement is essentially a contract. You are basically entering into a new contract, so you coud try to negotiate a lower payment or interest rate and even a reduction in the total amount of the debt that you owe. Some creditors may be receptive to new terms and others may not, but it is worth trying), and
2) entered into prior to discharge (The agreement must be entered into before the discharge order is entered. If you are in the process of negotiating a reaffirmation agreement and you are afraid that the discharge order may be entered rather soon, then the Bankruptcy Code allows you to file a motion to delay the entry of the discharge order so that you may finish the negotiations of your reaffirmation agreement), and
3) must contain certain "clear and conspicious" statements (a. Under certain circumstances a reaffirmation agreement can be a good idea, but entering into a reaffirmation agreement is not required. Never let a creditor make you feel that you are required to enter into a reaffirmation agreement, and b. If you entered into a reaffirmation agreement and later change your mind, you have a right to rescind. You can cancel the agreement anytime prior to discharge or within 60 days after it is filed with the court, whichever is later. However, you must notify the creditor in writing of your intention to cancel, and
4) filed with the court (The agreement must be filed with the court and the 60 day time period to rescind does not begin to run until the agreement is filed with the court), and
5) attorney declaration or court approval (The attorney must file a declaration stating that the reaffirmation agreement is a fully informed and voluntary agreement that does not impose an undue hardship on the debtor. If the debtor's budget shows that he or she does not have sufficient income to make the payments, then a presumption of undue hardship arises. The attorney is then required to certify that despite the debtor's income situation that they are able to make the payments. In situations in which a presumption of undue hardship arises, the court must review any reaffirmation agreement. The court may only approve a reaffirmation agreement if it is convinced that the agreement does not impose an undue hardship and that it is in the best interest of the debtor. The court will schedule a discharge hearing to advise the debtor of his or her rights. It will again stress that reaffirmation is not required, the right of rescission and the potentional consequences of reaffirming a debt.
There are two other points worth mentioning regarding reaffirmation agreements: 1) The debtor is required to seek court approval on any consumer debt that is not secured by real property. Otherwords, entering into a reaffirmation agreement on your mortgage or any other debt that is secured on real property does not require court approval, and 2) The court is required to approve any reaffirmation agreement on a consumer debt where a presumption of undue hardship arises, except in the case of a credit union. Otherwords, if you car loan is through a credit union it does not matter if a presumption of undue hardship arises.
If you are interested in filing for bankruptcy or have additional questions about your options, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form and you will be immediately contacted today to schedule a free consultation.
What if I change my mind after I file for bankruptcy and do not want to proceed with the case?
Sometimes a person may file for bankruptcy and shortly thereafter decide that bankruptcy is really not a good fit for them. If you change your mind, then you should file a motion to voluntarily dismiss your case. Probably the most common reason for wanting to dismiss a case is that the debtor could lose a significant amount of assets. Normally, a debtor exempts all of his or her assets and they are fully protected, but there could be times when an exemption that was claimed gets denied or simply new assets are discovered. For instance, circumstances could arise where the debtor comes into certain monies that had not been expected. Also, a debtor may decide that they would like to dismiss their case, so that they could re-file and add on some additional debts that did not exist at the time of their first filing. The rules regarding the voluntary dismissal of your case are somewhat different depending on whether it is a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.
VOLUNTARY DISMISSAL UNDER A CHAPTER 7 BANKRUPTCY MUST BE "FOR CAUSE"
In a Chapter 7 Bankruptcy, the Court can only dismiss a case after a notice and hearing. That means that it is necessary for the debtor to file a motion and serve it upon all the creditors listed on the bankruptcy schedules. This being the case, the debtor still has no absolute right to dismissal in a Chapter 7 Bankruptcy. A dismissal can only be ordered by the Court upon a showing of cause. In otherwords, the debtor must give a reason for the dismissal. Just what constitutes cause is in the sound discretion of the Court. A number of factors are looked at in determining whether to voluntarily dismiss a case. However, probably the main factor that the Courts consider is whether there are any assets available to distribute to unsecured creditors. The Courts perform somewhat of a balancing act: whether dismissal would be in the best interest of the debtor compared to the prejudicial effect on the creditor. Prejudice is considered to exist where the distribution of assets would be lost by the dismissal of the case. Even in that particular case, should the debtor be able to provide an assurance or guarantee that the creditors would be paid outside of the bankruptcy, then the Court may very well agree to dismiss the case. Generally though, it is almost impossible to have your bankruptcy dismissed if there are assets to be sold. If you have been able to exempt all of your assets meaning that it a no-asset case and no creditors have objected, then the Court will most likley allow your case to be dismissed.
DEBTOR HAS ABSOLUTE RIGHT TO DISMISSAL UNDER A CHAPTER 13 BANKRUPTCY
In a Chapter 13 Bankruptcy, a debtor has an absolute right to dismissal of their case, as long as it has not been converted from another chapter. The debor must file with the Court a notice indicating their intention to voluntarily dismiss their case. Even though notice and a hearing are not specifically provided for in the Bankruptcy Code, as with a Chapter 7 Bankruptcy, the Courts generally require that the notice be served on all creditors that are listed on your bankruptcy schedules. The Courts still must dismiss the bankruptcy case and are not permitted to convert the case to a Chapter 7 since the debtor has moved to dismiss the case. The Court should allow the case to be dismissed, even if a creditor has objected to the dismissal or seeks to have the case converted to a Chapter 7. Sometimes a debtor may face the choice of having the case dismissed or converted to a Chapter 7 Bankruptcy. Dismissal may be preferred if the debtor would lose significant assets in the conversion to a Chapter 7 Bankruptcy. Therefore, it is important to note that the right to dismissal in your Chapter 13 Bankruptcy is lost upon conversion. If the Chapter 13 case was orignially filed under another chapter, the debtor may still seek to have the case dismissed, but must seek the permission of the Court through the motion's process. The Court then weighs the various factors similar to those in a Chapter 7 Bankruptcy, as to whether dismissal is in the best interest of the debtor and does not prejudice the creditor.
One matter that needs to be considered when moving to voluntarily dismiss a case is that if debtor has the case dismissed and a Motion for Relief From Stay was previously filed, then the debtor is unable to file a new case for six months.
Once a case is dismissed the debtor is placed in the situation that he or she was in prior to filing the bankruptcy. Otherwords, creditors are free to commence collection activities as if no bankruptcy case had previously been filed. Any late fees or interest that accrued during your bankruptcy filing can now be added to the amount that you owe. However, you are free to again file another case under either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.
If you are uncertain about your situation and have many questions about bankruptcy that would help you in making your decision, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form. An appointment for a free consultation will be scheduled today.
Can bankruptcy help me adjust my car loan if it is upside down?
Oftentimes a person filing bankruptcy is the owner of a car that is secured by an automobile loan. Sometimes they are upside down or have negative equity in the vehicle. Otherwords, they owe more on the car than what is is worth. The Bankruptcy Code provides powerful tools that allow a debtor to limit the liens of secured creditors. There are basically two different approaches that a debtor could take depending on whether they filed a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.
THE RIGHT OF REDEMPTION IN A CHAPTER 7 BANKRUPTCY CASE
There is what is known as a right of redemption in a Chapter 7 case. The security interest held by the creditor can be eliminated upon making payment to the creditor of the value of the collateral, namely the car. The Bankruptcy Code lists certain requirements that need to be met to qualify for the right of redemption:
1. tangible personal property, and (This must be property that has been exempted by the debtor or abandoned by the Trustee. Even if the debtor has no equity in the property, so long as the debtor has a legal interest of any kind, then the property may be claimed as exempt)
2. intended primarily for personal, family or household use, and (Generally, in order to redeem a piece of property, the redemption must be for the benefit of the debtor and not for the benefit of another person)
3. must be a consumer debt, and (The Bankruptcy Code defines a consumer debt as a debt incurred by an individual primarily for a personal, family, or household purpose)
4. dischargeable debt
A redemption allows the debtor to keep their car and pay the creditor only the acutual value of the car, not the amount of the debt. Assume the debtor had a car worth 8,000, but the amount of the automobile loan was 15,000 at 8%. The debtor could finance the car and only payback the value of 9,000 at 24%. Of course the interest rate is higher, but the monthly payment would most likely still be lower than the current payment. In order to allow the debtor to make the lump-sum payment to the creditor, there are companies that provide redemption financing. Probably the best known is 722 Redemption Funding that can be found at www.722redemption.com or Redemption Financial Services at www.redemptionfinancial.com.
CHAPTER 13 BANKRUPTCY PROVIDES A TOOL KNOW AS THE CRAMDOWN
The Bankruptcy Code has a provision similar to the right of redemption utilized in a Chapter 7 Bankruptcy likewise in a Chapter 13 Bankruptcy. A debtor can change or modify the terms of the contract held by the secured creditor. That provision provides for what is known as the cramdown. The cramdown is where the debtor pays for the value of the collateral, namely the vehicle in this instance, as opposed to the full amount of the debt. In order to utilize the cramdown on your car the following conditions must exist:
1. purchase money security interest, and (The entire amount financed must be on a motor vehicle to be considered a purchase money security interest and would not include situations where the collateral secured a debt other than the price of the vehicle; a consolidation or refinancing of the automobile loan would destroy its' status as a purchase money security interest).
2. incurred more than 910 days preceeding the filing of the bankruptcy petition, and
3. collateral must be a motor vehicle, and (This provision reads that the collateral for the debt consists of a motor vehicle. If the debt is secured by any other collateral, then the restriction of the 910 days would not apply).
4. acquired for the personal use of the debtor (A vehicle that is purchased for a business use or for the use of someone other than the debtor is not considered as personal use of the debtor).
Sometimes a debtor may want to trade-in the car that they currently have toward the purchase of a new car. On occasion, their current car may be worth less than the amount that they owe on their loan, so they finance the difference as part of the purchase on the new car. The creditor does not have a purchase money security interest that secures the entire amount of its' claim. The question becomes whether this negative equity is included in the purchase money security interest. The courts take the view that the financing of negative equity is simply converting unsecured debt into secured debt. Pennsylvania takes the view that the portion of the claim that is a purchase money security interest shall remain. Even if you are unable to get past the 910 day rule, any amount that you have paid toward negative equity will be excluded from the lender's purchase money security interest.
Besides being able to utilize the cramdown, the debtor can lower the montly payment on the car loan by lowering the interest rate and possibly paying the loan over a longer period than provided by the terms of the loan.
If your automobile loan creates a burden for you and you would like to readjust your debt or simply have other questions about filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our contact form and you will be contacted shortly to schedule an appointment.
What are the time limitations on being able to file bankruptcy ?
A person can file a bankruptcy almost anytime in their effort to obtain a fresh start and put their financial problems behind them. However, there are certain restrictions on whether the filing can be under Chapter 7 or Chapter 13.
ELIGIBILTY TO FILE A CHAPTER 7 BANKRUPTCY
a. A person can only file a Chapter 7 every eights years. The eight year time period restricts the filing of your case within eights years of your present filing. Otherwords, it is calculated from the date of filing not the date of discharge.
b. A person cannot file a new Chapter 7, if they previously filed a Chapter 13 in which they received a discharge, and the new Chapter 7 is being filed within six years from the date of the filing of the Chapter 13. Again, it should be pointed out that the calculation is from the date of filing not the date of discharge. An exception to where a person would be able to file a Chapter 7, where the filing of the Chapter 13 which resulted in a discharge is less than six years from the previous filing, is where creditors in the earlier case were paid at least 70 percent of their claims.
ELIGIBILITY TO FILE A CHAPTER 13 BANKRUPTCY
a. A person cannot receive a discharge in a Chapter 13, if they previously filed a Chapter 7 in which they received a discharge, and the filing of the new Chapter 13 is being filed within four years of the previous filing of the Chapter 7. Again, it should be pointed out that the relevant time period is from the date of filing not the date of discharge.
b. A person cannot receive a discharge in a Chapter 13 case, if they previously filed a Chapter 13 in which they received a discharge, and the filing of the new Chapter 13 is being filed within two years of the filing of the previous Chapter 13. Again, it should be pointed out that the calculation is from the date of filing not the date of discharge.
ELIGIBILITY TO FILE A CHAPTER 13 BANKRUPTCY EVEN IF UNABLE TO RECEIVE A DISCHARGE
A person can still file a Chapter 13 Bankruptcy even though they may not be eligible to receive a discharge. The main benefit is that you will still receive the protection of the automatic stay. This is what prohibits creditors from proceeding against you. That being the case, you could file to cure a mortgage default or any other type of default.
IMPORTANT DISTICTION BETWEEN CHAPTER 13 AND CHAPTER 7
An important distinction between Chapter 13 and Chapter 7 is that a person can file a Chapter 13 and receive a discharge that is within eights years of a prior filing of a Chapter 7 that resulted in a discharge. Otherwords, the receiving of a discharge in the Chapter 13 is less than the eights years required to receive a discharge in a Chapter 7.
Since most Chapter 13s last anywhere from three to five years, a prior Chapter 13 will almost never prevent a person from filing a new Chapter 13. In essence, there are basically no restrictions on a person's ability to file a Chapter 13.
If you are seriously thinking about filing bankruptcy or simply have unanswered questions, then give Pittsburgh Bankruptcy Attorney Rodney Shepherd a call today at 412 471-9670 or fill out our client contact form. An appointment will be scheduled in which you will receive a free consultation to assist you in obtaining your much deserved fresh start.
Will the filing of a Chapter 13 Bankruptcy erase all of my debts?
A Chapter 13 Bankruptcy is a readjustment of all of a person's debts thereby establishing a repayment plan. This repayment period can be anywhere from three to five years. In any event, the ultimate goal of filing a Chapter 13 is to obtain a discharge. A discharge is to be issued upon the completion of all payments into the Chapter 13 Plan.
The whole idea behind filing a bankruptcy is to eliminate a person's debts. A bankruptcy wipes out most unsecured debts. These can include medical bills, personal loans, past due utility bills, business debts, charge accounts, collection agency debts and late fees. The discharge in a Chapter 13 case is oftentimes broader that that recived in a Chapter 7 Bankruptcy. The discharge in a Chapter 13 wipes out all debts that were provided for in the Chapter 13 Plan, except:
a. domestic support obligations, or (This generally refers to any child support, spousal or alimony owed to a spouse, former spouse or child of the debtor)
b. most student loans, or (There is a rare exception to discharging student loans. A hardship discharge can be sought. This does not include a financial hardship by itself, but usually must be of the type that is a long-term health condition that will prevent the debtor from being able to make payments on the loan)
c. debts for restitution or damages awarded in a civil action that were the result of the willful or malicious injury by the debtor that caused personal injury or death
d. certain criminal fines or restitution that were included in the sentence of the debtor's criminal conviction, or
e. certain drunk driving debts, or (These are for debts that the debtor has incurred due to the unlawful operation of a motor vehicle, vessel or aircraft while intoxicated and that resulted in the personal injury or death. It may still be possible to discharge damages to property)
f. long term debts in which the final payment falls due after the completion of the plan; or (This most often refers to a mortgage debt, whereby the mortgage arrears have been cured upon the completion of the Chapter 13 Plan, but the final payment does not fall due until several years later)
g. tax debts, or (Benjamin Franklin once said that two things are certain in life, death and taxes. There are limited situations where some old taxes can be discharged. Even under those circumstances if a tax return is unfiled or late or a fraudulent return is filed, then those taxes would not be dischargeable)
h. debts that have been incurred by false pretenses or fraud; or (In order for a debt of this type to be nondischargeable, the creditor has to file a timely motion objecting to the discharge of this particular debt and the Court must rule that the debt is in fact nondischargeable)
i. debts not listed in the bankruptcy, or (All of the debts that you are wanting to discharge in your Chapter 13 needs to be listed in your bankruptcy forms. A Chapter 13 is considered to be an asset case and therefore a creditor is entitled to notice of the bankruptcy filing and to be provided with the opportunity to file a proof of claim. This is simply a breakdown or an itemization of the amount that the creditor claims that is owed. This to allow the creditor to be able to possibly share in any monies that are to be distributed from the bankruptcy estate)
j. debts for fraud while acting as a fiduciary, or (This is similar to the type of debts incurred through false pretenses. The creditor must file a timely motion objecting to the discharge of this particular debt and the Court must in fact agree that the debt is nondischargeable).
The Chapter 13 Bankruptcy discharge may eliminate or wipe out certain debts that are not dischargeable in a Chapter 7 Bankruptcy. Those debts that are dischargeable in a Chapter 13 include:
a. willful and malicious injury to property, or (Debts owed to an individual that arose from the debtor's willful and malicious acts that have not been awarded restitution or damages are dischargeable)
b. marital settlement agreements, or (Debts that you owe to an ex-spouse that are part of a divorce or separation agreement that are not in the nature of support are dischargeable)
c. certain fines and penalties, or
d. debts incurred to pay nondischargeable taxes
Before a debtor can receive the full benefits of a discharge it is necessary to determine whether any creditor has secured its' claim by placing a lien on your property. The most common way that a creditor gets a lien on your property is by obtaining a judgment. It will be necessary to avoid that lien or the creditor will retain the right to collect on that judgment. Any personal liability on your part will be wiped out, but the creditor can file an action to collect against the particular property.
If your circumstances are such that you are in need of filing for bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our client contact form to schedule an apppointment for a free consultation. Attorney Shepherd will explain the differences between a Chapter 7 Bankruptcy and a Chapter 13 Bankruptcy and which option is best for you.
Are there any type of restrictions on the use of my credit cards or incurring other debt prior to my filing bankruptcy?
CREDIT CARD USE OR OBTAINING A CASH ADVANCE PRIOR TO FILING BANKRUPTCY MAY CREATE A PRESUMPTION
A debtor who has incurred consumer debts in excess of $675.00 owed to a single creditor for luxury goods or services within 90 days prior to filing bankruptcy or who has taken out a cash advance on an open ended credit plan that totals more than $950.00 within 70 days prior to filing bankruptcy, then such debts are presumed to be nondischargeable. This means that those debts are presumed to have been incurred through false pretenses, false representation or actual fraud. Otherwords, it is presumed that the debtor had no intent to repay those debts at the time they were incurred.
PRESUMPTION IS ONLY REBUTABLE AND MAY BE OVERCOME
However, this is simply a presumption and the debtor may rebut the presumption by showing evidence that there was in fact an honest intent to repay the debt at the time it was incurred or that the debt was not for luxury goods or services, as defined by the statute or that the cash advance that was taken out does not fall within the covered definition. This presumption can also be overcome if the debtor can show that there has been a change in circumstances from the time the debt was incurred. Also, the presumption would be rebutted if the debtor can show that the credit card was used without his or her knowledge or permission. Many courts have held that such a presumption can be implied, as opposed to simply being expressed. This is basically to prevent the debtor from going on a spending spree shortly before filing bankruptcy. Once the debtor rebuts the presumption, the burden of proof shifts to the creditor to prove fraudulent intent. It is not sufficient to simply show that a debt was incurred and not paid because this is true of all debts. Usually, unless the debtor makes an admission, it is very difficult to produce any evidence that would be able to prove a fraudulent intent. Keep in mind, that unless the creditor files a timely objection to the dischargeability of the debt, then the presumption does not even come about. If you are facing such a factual situation where the presumption could arise, then you might want to delay the filing of the bankruptcy in order to get past the relevant time periods. It is important to keep in mind that the time periods are only relevant with respect to the automatic presumption. Any debts that are incurred prior to those time periods can still be found to be nondischargeable if fraud or false pretenses can be proven.
CREDIT CARD USE MUST BE BE FOR LUXURY GOODS OR SERVICES
The discussion of credit card use would not be complete without a more thorough definition of luxury goods or services. Just what are luxury goods or services depends on the particular facts and circumstances of each case. Such items that constitute luxury goods or services include expensive jewelry, Christmas gifts, expensive floral arrangements, high-end clothing, expensive cosmetics, but such list is not exclusive and can include many more items. Luxury goods or services do not include items that were reasonably acquired for the support or maintenance of the debtor or the debtor's dependents. Items that would be excluded would be moderately priced clothing, Barbie dolls and accessories and even a new Chevrolet Lumina.
CASH ADAVANCES PRIOR TO THE FILING OF BANKRUPTCY CAN CAUSE PROBLEMS
Taking out a cash advance of more than $950.00 within 70 days prior to filing bankuptcy can cause problems. A cash advance must be an extension of consumer credit under an open end credit plan. This basically means that the cash advance must be under a plan where the creditor expects repeated tranactions and the terms of the transaction have been spelled out and there is a finance charge on the unpaid balance.
If you are thinking about filing bankruptcy, but are not certain about when would be the best time to file. Call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412-471-9670 or complete one of our client contact forms for a free consultation.
Can my employer discriminate against me if I file for bankruptcy?
EMPLOYERS CANNOT DISCRIMINATE AGAINST A PERSON SOLEY BECAUSE THEY FILED BANKRUPTCY
The Bankruptcy Code prohibits conduct by a governmental or private employer that would discriminate against a person solely because they have filed bankruptcy, has been insolvent before the commencement of the case or has discharged a debt in bankruptcy. It is first necessary to determine whether an employment relationship does in fact exist. This generally means that you were in an employment position at the time the bankruptcy petition was filed. The prohibition does not extend to hiring or other types of decisions where the debtor was not yet an employee of the employer on the date the bankruptcy petition was filed. The definition of an employment relationship is quite broad and may include situations generally not thought to be included.
EMPLOYERS CAN STILL DISCRIMINATE FOR OTHER REASONS, BUT THE COURTS MAY STILL FIND A VIOLATION
A governmental or private employer are clearly prohibited from discriminating against a debtor with regard to their employment. This prohibition extends to discrimination regarding any aspect of a debtor's employment. The debtor must prove the offense or act committed by the employer was due soley because of the debtor's bankruptcy filing, being insolvent before the commencement of the case or the non-payment of a dischargeable debt. If the employer can show that there were other reasons for its' conduct toward the employee, then there is no violation. If a debt is of the type that is nondischargeable, then any discrimination is not prohibited. A debtor can encounter problems in proving the actual motivation of the employer if the employer provides other reasons for its' actions. Even when the employer provides its' other reasons for the discrimination, the Court can still disregard those other reasons if they appear to be frivolous and deem that a violation has in fact taken place. If it is determined that a violation has taken place, then the debtor is entitled to injunctive and declaratory relief. Such relief could be in the nature of the actual reinstatement of the employment position, if the debtor had already been terminated or even the promotin of the debtor to a new position, if such promotion had been previously denied. Not only can the debtor be awarded injunctive or declaratory relief, but an award of monetary damages for lost wages is a possibility, excluding any punitive award. The Court generally will not award attorney fees either. The Bankruptcy Code gives the Court considerable leeway in fashioning remedies to allow the debtor to reap the benefits of a fresh start that the filing of bankruptcy is intended to provide. It should be pointed out that these awards are generally for actions that occur after the bankruptcy case is filed and are not property of the bankruptcy estate. This means that a debtor in a Chapter 7 Bankruptcy can keep any award since it is not property of the estate. However, since the duration of a Chapter 13 is normally for five years, any award may become property of the estate and require a payment to unsecured creditors.
If you have questions about just how the bankruptcy process can play out, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or complete our cleint contact form. Every effort will be made to answer your questions and to provide you with a more detailed explanation of the entire process.
Will filing bankruptcy allow my driver's license to be restored if it has already been suspended?
Chapter 7 Can Prevent Your Drivers License From Being Suspended
The main objective behind allowing a person to file for bankruptcy is to provide that individual with a fresh start in life. The Bankruptcy Code clearly prevents the government from discriminating against a debtor by suspending, denying or revoking their driver's license soley because they failed to pay a motor vehicle related judgment that would be dischargeable in their bankruptcy. Otherwords, if the debt is dischargeable in bankruptcy, then the license cannot be denied. Likewise, the State is prohibited from creating any licensing or other type of requirements simply because a person filed for bankruptcy. The whole idea behind the prohibtion against discrimination is that a person with a discharged debt should be treated the same way as a person who never had any type of debt.
However, it should be pointed out that if other reasons exists for the government's action, then such action may be permissable and not be a violation. An example of such a sitiation would be where a license has been suspensed or revoked due to a certain number of points being assessed after various traffic violations. If the law that is being applied to you is not designed to coerce the payment of a debt that would be dischargeable in bankruptcy and requires the same actions from debtors and non-debtors alike, then there is no violation.
In order to have your license restored there are certain documents that will need to be provided to the Pennsylvania Department of Transportation:
- Proof that the Bankruptcy was filed (a certfied copy of the cover sheet to the bankruptcy petition),
- Copy of the bankruptcy schedule that list the motor vehicle judgment to be discharged,
- Affidavit stating that the judgment is not for personal injuries or death caused by the debtor's operation of a motor vehicle while intoxicated, and
- Proof of current financial responsibility for any vehicle titled in the debtor's name, or an affidavit stating that the debtor does not have any vehicles titled in his or her name.
Once all of this documentation has been provided to the State, then your license will be restored. The Pennsylvania Department of Transportation will not mail your license to you. It will still be necessary to go to your local license branch to reapply and have the license reissued. Sometimes a person fails to provide this information to the State while their bankruptcy is still active. Even if you provide all of the above-mentioned documentation after your bankruptcy has been discharged and closed out your license can still be restored.
Chapter 13 Is Your Best Alternative, If The Debt Is Of The Type That Is Non-Dischargeable In A Chapter 7
The typical type of debt that causes a person's driving priviledges to be suspended is where a money judgment has been entered against them due to a motor vehicle accident. Upon filing a chapter 7 bankruptcy that type of debt can be discharged and you can have your license restored. However, there are times where an individual's driver's license is suspended due to the non-payment of traffic fines. Traffic fines are generally not dischargeable in a chapter 7. The filing of a chapter 13 bankruptcy may allow you to disharge certain debts that would not be dischargeable in a chapter 7 bankruptcy. For instance, traffic fines are generally dischargeable in a chapter 13. If the debt is of the type that will be discharged upon the successful completion of the chapter 13, then the debtor is entitled to have their license renewed during the pendency of the chapter 13. Should the debtor's chapter 13 bankruptcy get dismissed or it becomes necessary to convert their case to a chapter 7 bankruptcy, then the State would be able to again suspend or revoke their driver's license. Criminal fines are clearly not dischargeable in either a chapter 7 bankruptcy or a chapter 13 bankruptcy. However, a debtor may provide for these debts in their chapter 13. The automatic stay would prohibit any collection efforts, which could include the revocation of your driver's license.
If your driver's license has been revoked or suspended for the reasons listed above, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412-471-9670 or complete our client contact form to discuss the necessary steps to have your driver's licesne restored.