Archive for December, 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.