Archive for 2009

How Much Do I Need to Owe to File for Bankruptcy

Saturday, December 26th, 2009

There is no specific sum that one needs to owe to file for bankruptcy.

Rather,  the need for filing will depend on the particular circumstances that a person confronts. For example, a surgeon with $40,000 of credit card debt may not need to file. An elderly person with medical needs, huge monthly utility bills and a particular sensitivity to collection calls having $8,000 of credit card debts may need to file.

Some of the many factors to consider before filing a bankruptcy petition are:

1.   Your ability to pay debts as they become due, based on current household income and expenses.

2.   Whether the amount that you owe can be paid back within a reasonable period of time without adversely impacting your lifestyle, measured by reasonable and necessary expenses.

3.   Whether there is an immediate need for you to stop creditor action, such as collection efforts, levies, garnishments, foreclosures, repossessions or telephone calls.

4.   Whether you are particularly sensitive to collection calls.

5.   Whether you have a need to cure a particular debt (e.g., a mortgage arrearage) through a court-ordered plan, without a particular concern for discharging debts.

6.   Whether you or a household family member has incurred a permanent job loss or decline in income.

7.   Whether you or household family member has incurred an illness or a family member upon whom you relied on for support has died.

8.   Whether you are engaged in a divorce proceeding.

9.   Whether you or household family member has a need to devote funds to a particular debt or debts, such a medical debts, tax debts, child support or student loans.

10.  The nature of the your debts (e.g., child support, student loans, taxes, credit cards, mortgage or business debts).

11.   Your personal view toward a bankruptcy filing.

If you wish to discuss the content of this post further, please feel free call me at (570) 823-9400 or write to me at davidharrisesq@epix.net.

Can I Transfer My Property To Friends or Family to Keep From Losing It in a Bankruptcy

Saturday, December 19th, 2009

Generally a debtor cannot transfer property to others to keep from losing it in bankruptcy…unless the debtor has transferred the property for fair value or in exchange for other property of the same value or, in Pennsylvania, the debtor has transferred the property more than 4 years prior to a bankruptcy filing.

The Bankruptcy Code allows a bankruptcy trustee to “avoid” any transfer of property by a debtor if: (a) the debtor intended to hinder, delay or defraud creditors, or (b) the debtor receives less than a reasonably equivalent value (in money or other property) in exchange for the property, (c) the debtor was insolvent at the time of the transfer or was made so as a result of the transfer, and (d) the transfer occurred within 2 years of the date of the bankruptcy filing. Pennsylvania law extends the “lookback” period to 4 years.

“Avoid” means that the trustee can retrieve or repossess the transferred property or obtain a judgment (against the debtor or the person who receives the property) in an amount equal to the value of the transferred property as of the date of the transfer.

What is worse is that once the trustee retrieves the transferred property, the debtor will not be entitled to exempt any portion of the property because, technically, the debtor is not the owner of the property on the date of his or her bankruptcy filing (a prerequisite under the Bankruptcy Code to being allowed to take an exemption).

Nevertheless, there are several legal, ethical and court-approved ways to transfer property to keep from losing property in a bankruptcy case.

If you wish to discuss the content of this post, please feel free call me at (570) 823-9400 or write to me at davidharrisesq@epix.net.

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How Long Does Bankruptcy Take

Saturday, December 12th, 2009

I have known bankruptcy cases to take anywhere from 5 months to 24 years!

Most consumer Chapter 7 cases take approximately 5 to 6 months from the date that it is filed until the date that it is closed, unless: (a) the debtor has assets to be liquidated and distributed in the case, (b) when the Chapter 7 trustee is investigating past actions of the debtor, (c) when the Chapter 7 trustee is investigating whether unreported assets exist, or (d) when the Chapter 7 trustee simply forgot to close the case as a matter of oversight.

Most Chapter 13 cases take from 3 to 5 years.

A Chapter 13 case will take 3 years where the debtor’s household income is less than the debtor’s residence state’s median income for a same-sized household or where the debtor has significant income and can pay all his or her debts in 3 years or less.

A Chapter 13 case will take 5 years where the debtor’s household income is more than the debtor’s residence state’s median income for a same-sized household or the debtor simply chooses a 5-year plan term instead of a 3-year term.

A choice of this nature may exist if the debtor is seeking to cure a mortgage arrearage as part of his or her Chapter 13 plan and would prefer a lower monthly payment by spreading out the cure obligation over 60 months (5 years) instead of 36 months (3 years).

A choice of this nature may also exist if the debtor is compelled to file a Chapter 13 case rather than a Chapter 7 case as a result of having non-exempt equity in assets that would have been liquidated in a Chapter 7 case. Thus, a debtor who had $20,000 of non-exempt equity may prefer paying $333.33 to a Chapter 13 trustee over a 60-month period instead of paying $555.55 over a 36-month period.

A debtor will not have the option of a 3-year Chapter 13 plan where the debtor is an “above median debtor,” unless the debtors pays all his or her unsecured debts within the 3-year period in the plan. Simply, an “above median debtor” is required to commit all his or her income to a 5-year plan, unless the debtor has certain, but significant, expenses. However, as stated earlier, if a debtor has significant income and, as a result, can pay all his or her debts in less than 5 years, he or she will conclude his or her case in a shorter period of time.

And now…the case that lasted 24 years…the “Blue Coal” case, here in my home town of Wilkes-Barre, Pennsylvania. The case was filed one year after I graduated from high school. I spent four years in college, three years in law school, two years in grad school, began my career far from home, then moved back home and had the unique experience to participate in the case, more than 12 years after the case was filed.

If you have any questions about this post, please write to me at: davidharrisesq@epix.net or call me at my Wilkes-Barre, Pennsylvania office at (570) 823-9400.

Do I Have To Go To Court When I File For Bankruptcy

Wednesday, December 9th, 2009

In most cases you do not have to go to court when you file for bankruptcy.

You will, however, always have to appear for a meeting, known as a Section 341 or creditors meeting,  approximately 5 to 8 weeks following your bankruptcy filing, where the trustee appointed to your case and your creditors can ask you limited questions about your assets and finances.

In Pennsylvania, these meeting are ordinarily not held in a court. Also, so you know, credit card companies, banks and mortgage lenders usually do not appear at these meetings.

If the trustee or a creditor of yours seeks to challenge your right to obtain a discharge in your bankruptcy case (for any of a variety of reasons, including fraud) or if a creditor seeks to obtain relief from the protection that the bankruptcy law affords you (known as the automatic stay) to pursue a claim against you or your property in state court (such as initiating a foreclosure action), you may be required to appear in bankruptcy court to defend that action.

You may also be required to appear in bankruptcy court if you elect to sign a reaffirmation agreement in order to keep a vehicle that is secured by a loan. Your appearance is simply to convince the bankruptcy judge that you have to ability to maintain your vehicle payments.

If you have any questions about this post, please write to me at: davidharrisesq@epix.net or call me at my Wilkes-Barre, Pennsylvania office at (570) 823-9400.

The Truth About Foreclosures and Loan Modifications

Sunday, November 15th, 2009

Here is a must-view seven minute video from the one person who truly can claim paramount knowledge on this topic: Elizabeth Warren.   Please cut and paste:  http://ow.ly/tEI4

Please call me to discuss your questions at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net. You may also write to me at 15 Public Square, Suite 310, Wilkes-Barre, PA 18701.

Should I File A Chapter 13 Case Instead Of A Chapter 7 Case

Thursday, October 22nd, 2009

Ideally, a debtor who contemplates filing a bankruptcy case to discharge debts strives to do so under chapter 7 of the Bankruptcy Code because a chapter 7 case is of shorter duration and is less costly than a chapter 11, 12 or 13 case filing.  However, a debtor typically considers filing under chapter 7 if he or she: (A)  will not lose property that he or she desires to keep; and (B) has household gross income that is less than the published median for the debtor’s state of residence.

By contrast, a debtor may file under chapter 13 for any of the following reasons:

1.  The debtor has non-exempt equity in assets.  Simply stated, this occurs when the value each of the debtor’s assets or value of an asset group exceeds the encumbrances on the asset or asset group and the allowed exemptions afforded by the Bankruptcy Code for each asset or asset group.  If a debtor will lose property that he or she desires to keep, he or she will file a petition to institute a chapter 13 case and pay an amount equal to the non-exempt equity of his or her assets in a chapter 13 case over a period of 36 to 60 months. This may result in unsecured creditors receiving anywhere from 1% to 100% of their allowed claims.

2.    Even if a debtor has no non-exempt equity in assets, the debtor must file under chapter 13 if his household gross income exceeds the published median for the debtor’s state of residence.  Nevertheless, even if the debtor is an “above median” debtor,  he still may be able to file under chapter 7 if his “allowable ” monthly expenses offset his monthly gross income, leaving him with net disposable income of approximately $182.50 per month or less. (“Allowable” is defined by IRS standards.)  If a debtor is compelled to file a petition to institute a chapter 13 case as a result of being an “above median” debtor with $182.50 or more of monthly disposable income, then he or she must pay that monthly excess into a 60-month chapter 13 plan. This may result in unsecured creditors receiving anywhere from 1% to 100% of their allowed claims.

3.      A debtor may consider filing a chapter 13 case if he or she desires to keep his or her home but has incurred a mortgage arrearage or is subject to a mortgage foreclosure action.  A chapter 13 filing is a common way to enable a debtor to “cure” or bring current a mortgage arrearage by making payments to a chapter 13 trustee over a period of 36 to 60 months while maintaining monthly mortgage payments directly to the mortgage company. This is known as a “cure and maintain” plan, where the trustee will distribute funds toward the arrearage each month.

4.    A debtor may consider filing a chapter 13 case to cure non-dischargeable unsecured debts over a 5-year period (i.e., 60 months) while stopping the running of interest.

5.    A debtor may also consider filing a chapter 13 case simply to keep creditors at bay until a sale of assets at fair value is consummated.

6.   A debtor may consider filing a chapter 13 case to eliminate or modify  a mortgage or other secured debt if certain conditions are met.

7.   A debtor may  consider filing a chapter 13 case where the debtor desires to control his or her assets and avoid administration or scrutiny by a trustee.

8.    A  debtor may consider filing a chapter 13 case where the debtor has potential claims  for lender liability, or collection, creditor reporting or other violations, where the debtor believes that the bankruptcy court will be a better forum to hear such claims.

9.    A debtor may  consider filing a chapter 13 case to altruistically pay back some or all of his or her debt.

Please call me to discuss your situation at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net. You may also write to me at 69 Public Square, Suite 700, Wilkes-Barre, PA 18701.

Please also visit MY HOME PAGE to learn more about my law practice and me.

Will You Lose Property If You File A Bankruptcy Case

Saturday, October 3rd, 2009

More often than not, No!

A chapter 7 bankruptcy case is a liquidation or “straight bankruptcy” case, meaning that the debtor’s assets are liquidated and the proceeds are used to pay creditors’ claims.  In exchange for surrendering property to  satisfy claims, debtors are granted a discharge of liability on most prepetition (i.e., pre-bankruptcy) debts.  However, not all of an individual debtor’s assets are liquidated to pay claims;  rather, some assets are “exempt” and do not become property of the debtor’s bankruptcy case. In other words, exempt assets are not part of the pie which is liquidated and then distributed. A debtor’s claim of exemptions is at the heart of a bankruptcy case.

Permitting individual chapter 7 debtors to claim certain property as exempt serves the “fresh start” policy upon which the Bankruptcy Code is based. The items which a debtor can claim as exempt are items which are vital to a debtor’s ability to get on with his or her life after being granted a discharge. It is essential to the fresh start policy that, at an early stage in their bankruptcy cases, debtors have a clear picture regarding whether the assets they have claimed as exempt are, in fact, exempt.

Please call me to discuss your situation at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net. You may also write to me at 69 Public Square, Suite 700, Wilkes-Barre, PA 18701.

Please visit MY HOME PAGE to learn more about my law practice and me.

Can I Discharge My Student Loans By Filing a Bankruptcy Case

Monday, August 24th, 2009

You can discharge your student loans by filing for bankruptcy if you can establish that paying back the student loans will create an undue hardship to you and your dependents.

In plain English, a discharge of a debt means that the debt is no longer legally enforceable. However, some debts are not dischargeable in a bankruptcy filing.  A student loan debt, for example, is not dischargeable unless, not allowing the discharge will create an undue hardship to you and your dependents.

Undue hardship is more that just a basic hardship. The case law that controls Pennsylvania residents and the residents of a majority of states holds that “undue” hardship exists if all of the following three elements are satisfied:

(1) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for himself or herself and his or her dependents if forced to repay his or her student loans;

(2) additional circumstances exist indicating that this state of affairs is likely to persist for the significant portion of the repayment period for the student loans; and

(3) the debtor has made good faith efforts to repay the loans.

These factors require a detailed examination and they have had varying interpretations by the courts. Don’t assume, however, that you do not qualify for a student loan discharge. I was able to obtain a discharge for a client of a student loan in excess of $300,000.00 as a result of a case decided by now United States Supreme Court Justice Samuel Alito before whom I appeared.

Aside from a bankruptcy filing, you may have other options for dealing with your student loans.

Please call me to discuss your situation at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net. You may also write to me at 69 Public Square, Suite 700, Wilkes-Barre, PA 18701.

Please visit MY HOME PAGE to learn more about my law practice and me.

Will A Bankruptcy Filing Or My Spouse’s Bankruptcy Filing Affect My Rights in a Divorce Proceeding

Monday, August 10th, 2009

In the American Bar Association manual, “The Family Lawyer’s Guide to Bankruptcy,” Shayna and Bruce Rosenfeld state that one quarter of all bankruptcy filings are caused by divorce.

I believe that the converse is true as well:  financial strains that lead to bankruptcy cause divorce.

Typically, the spouse who files bankruptcy is the one obligated to pay alimony, child support and make the hold harmless payments.

A bankruptcy filing, however, may be of benefit to both divorcing spouses, as the debtor-spouse can discharge non-marital debts and free up money to pay the divorce-related debt owed to the other spouse.

At one time, bankruptcy was an effective weapon to thwart or impede a divorce or undo the result obtained after a settled or contested divorce. However, on October 17, 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) that dramatically changed the ability of a bankruptcy case to do so.

A debtor’s ex-spouse is a great beneficiary of this legislation, as Congress has made it substantially more difficult for a debtor to escape divorce-related obligations, as debtors generally may now thwart or impede a divorce-related obligation only if the obligation is considered to be a property settlement (rather than alimony, maintenance or support) and if the debtor is able to successfully navigate his or her way to a Chapter 13 discharge via three to five years’ worth of plan payments to a Chapter 13 trustee.

There are other creative uses of BAPCPA to deal with family law obligations. Therefore, a divorcing spouse or a soon-to-be divorcing spouse should seek counsel from a seasoned bankruptcy attorney to discuss the pro’s and con’s of filing for bankruptcy protection and to discuss the pro’s and con’s to defending actions taken by a spouse who has filed for bankruptcy protection.

Please call me to discuss your situation at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net. You may also write to me at 15 Public Square, Suite 310, Wilkes-Barre, PA 18701.