Use Your Tax Return to Finally Get Out of Debt

It’s tax time, and for many people, that means a tax refund.  Many times, people will use their refund to try to get caught up on bills that they have fallen behind on over the past year i.e. credit card debt incurred during the holiday season, past due utility bills, some unexpected medical expenses, or that remaining cap balance.  Unfortunately, for most people, the couple hundred or thousand dollars that they receive from Uncle Sam will not be enough to fix their economic problems.  It may provide them with a short reprieve, but in three to four months, they find themselves back in the same economic crisis.  If you are one of those individuals, one solution may be to use your tax return money to retain an attorney to assist you with a bankruptcy filing.  While this may not be the best solution for everyone, if you find that your tax refund will barely be enough to cover the minimum payments on your credit cards for the next two or three months, then a free consult may be in order.  After all, you don’t want to use your return to pay down the balances only to find that you need to re-use the cards to cover your minimal living expenses.  For more information about bankruptcy or to schedule a free consultation, please contact the Law Office of Suzanne Szymoniak.


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What to Expect at Your 341 Meeting

Many times, when I have a client that wishes to file for a Chapter 7 or Chapter 13 bankruptcy, he/she will have concerns regarding any necessary court appearances.  In a standard case, all debtors are required to make one appearance in front of the trustee of their case.  This “hearing” is called a 341 Meeting of Creditors.  The primary purposes for the “hearing” are to swear that the information that has been provided is true and accurate and to allow any creditors who may want to object to the bankruptcy a chance to be heard.  This is usually a very informal affair.  Typically, the trustee will schedule several 341 Meetings at one time and call each debtor up one by one.  Then the trustee will proceed to have the debtor raise his/her hand and swear to tell the truth, the trustee will confirm the debtor’s identity by reviewing his/her drivers license and social security card, and finally, the trustee will proceed with asking the debtor about a dozen or so questions.  Questions you can anticipate the trustee to ask include:

  • Have you reviewed your bankruptcy petition and schedules and did you sign the documents?
  • Is the information provided in your bankruptcy petition accurate with no errors or omission?
  • Do you own any real estate?
  • How did you determine the value of your real estate?
  • Do you have any pending claims against anyone or potential claims that you could bring against anyone?
  • Does anyone owe you any money?
  • Are you anticipating receiving money from any source other than wages over the next six months?
  • Have you filed you state and federal taxes for the last four years?
  • Have you filed your taxes for this year?
  • Have you received or do you anticipate receiving a tax refund?  If so, how much do you expect to receive?
  • What circumstances caused you to file for bankruptcy?
  • Does anyone here want to enter an appearance in this case?  (This is the trustee’s way of seeing if any creditors have appeared to contest the bankruptcy.  In many cases, no creditors appear and the matter is concluded).

Of course, each case is unique and presents the opportunity for questions above and beyond those listed here; however, as long as you are truthful with your attorney and the information contained in your petition/schedules is accurate, your 341 Meeting should be nothing more than a procedural step necessary to obtain your discharge.

For additional information regarding bankruptcy, please contact the Law Office of Suzanne Szymoniak.

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Debt After Death: Can Your Creditors Haunt Your Loved Ones?

Although an uncomfortable topic for many people, it is never a bad idea to consider what will happen after you pass and to begin planning for it.  For most people, this consideration is limited to what will happen to their assets after they die.  What many people fail to consider is what will happen to their debt, but this requires just as much consideration since your debt can have a significant effect on what assets will remain in your estate for your beneficiaries.

There are several factors that determine what happens to your debt after you die.  The two most important factors to consider are the person or people who applied for the debt and the state in which you live.  In most cases, if you have debt at the time of your death, assets held in your estate will be used to pay off the debt.  If the estate goes through probate, your administrator or executor will look at your assets and debts and determine in what order bills should be paid.  In the case of secured debt, if the assets do not cover the debt, the property may be sold or repossessed to cover it.  Remaining assets will be distributed to heirs based upon your will or state law if you do not have a will.  If there is not enough money in the estate to cover the bills, the credit card companies and other lenders will end up writing off the unpaid debt.  Children, friends, or relatives generally cannot inherit debt, and a creditor usually cannot legally force someone else to pay.

There are two situations where your debt may pass to another person.  If the account was a joint account that was shared with another person such as a spouse or business partner, that person would be legally responsible for paying off the debt along with or instead of your estate.  This applies to anyone who signed the application, but is not applicable to authorized credit card users who had charging privileges but did not apply for the credit originally.  The second situation occurs in states that employ community property laws.  They include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.  Normally, assets accumulated during a marriage are considered joint property in community property states, and in some cases, so are debts; therefore, depending on the laws in each state, the surviving spouse may be responsible for the debt of their deceased partner even if they held a separate account.

After a death it is important that all creditors are notified of the account holder’s passing.  In most cases, the person handling the estate will be responsible for notifying creditors and providing copies of the death certificate. The Credit CARD Act of 2009 requires credit card issuers to stop tacking on fees and penalties during the time the estate is being settled.  Without being notified, the creditors have no way of knowing about a death and will continue to pile on fees and penalties for delinquent payments; thereby further depleting the estate and reducing the inheritance of the beneficiaries.

It is important to note that some of your assets may be protected from your creditors and pass straight to your beneficiaries.  For instances, items such as IRAs, 401(k)s, and insurance, do not go through probate and typically, pass to whomever has been named as a beneficiary.  In many cases, these assets are not considered part of the estate, and depending on the laws in your state, these assets cannot be touched by your creditors.  This is particularly true for 401(k)s since they are governed by federal law which gives them protection from your creditors.  Additionally, many states allow a house to pass from one spouse to another after a death without letting creditors intervene.

This is one area where sitting down with an estate lawyer in your state may be beneficial to ensure your estate is handled properly and that any assets that can be protected from your creditors are in fact protected.  Additionally, for older individuals who are concerned about their credit card debt eating up their estate and taking assets from their loved ones, you may want to consult with a bankruptcy attorney in your state to see if you can have those debts wiped out to help preserve your estate for the people you care about.  For additional information regarding estate planning or bankruptcy, contact the Law Office of Suzanne Szymoniak.

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Understanding Equitable Distribution

Unlike California, Pennsylvania is not a community property state, which means that just because you were married to the person doesn’t mean you automatically get half.  Rather, Pennsylvania courts use a process of equitable distribution to divide up a couple’s marital property.  But what exactly does that mean?  What it means is that the courts try to come up with a property settlement that is “fair” to the parties taking into consideration a number of factors.  Some factors that the courts will consider include: length of the marriage, age, health, amount and sources of income, employability and needs of each party, contributions by one party to the education, training or increased earning power of the other party, each party’s contribution to or dissipation of the marital property, including the contribution of a party as homemaker, sources of income of both parties, standard of living of the parties established during the marriage, and whether the party will be serving as the custodian of any dependent, minor children.  One of the things the court will not consider is the marital misconduct of the other spouse.  There are times when this will be a factor to consider, but when dividing up the marital property, it is not.

But knowing how the courts decide to divide up the property is only half of the equation.  You also need to know what property, the court will be looking to divide.  The courts divide up all of the marital property.  What is considered marital property?   Marital property includes all property that was acquired during the marriage, regardless of whose name it is.  Gifts from one spouse to another are marital property if they were purchased with marital funds; however, gifts and inheritances that a spouse receives during the marriage from a third-party belong to that spouse.  Although, there can be a loophole here if non-martial funds (i.e. money received from inheritance) become mixed with marital funds (say in a joint checking account).  Rather than try to sort it out, the court could rule that all funds in that account are marital property.  Pensions and business interests that were developed by one spouse are considered marital property if they were acquired during the marriage.  Additionally, increased value in a business owned prior to the marriage would be considered marital property.

Although you now know the how and what of equitable distribution, dividing up the marital property can still cause a great amount of tension between divorcing parties.  If you find that you and your spouse are unable to come to an arrangement on your own, please contact the Law Office of Suzanne Szymoniak.  We can help insure you obtain the property settlement that you deserve.

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The Cost of an Education

If you are like me, you probably have a decent amount of student loans that are now due or will be coming due shortly.  When I was growing up, I remember hearing about how I needed to get a good education if I wanted to get a well-paying job and make a decent living.  Coming from a lower-middle class family (and that’s probably being generous), I knew that the only way I could get that education and go on to live the American dream was to finance my education.  What I probably didn’t consider was how much that education was going to ultimately cost me.  Granted, I believe my education is valuable to an extent, but will it be worth the $130,000 I had to take out in student loans and will be paying on with interest over the next 25-30 years?  Only time will tell.  But what if it’s not?  That’s the question, I believe potential college students need to carefully consider before deciding to further their education.

Student loan lenders (unlike most other lenders short of government agencies) are given great protection by our government (don’t believe me see this article where a court determined that paying back loans were not an undue hardship for a blind diabetic who was making $811 a month in social security); therefore, if all that education fails to deliver on that promise of a bright future, there is little if anything you can do about it.  Let’s look at a comparison.  Five years ago you bought a $200,000 house.  Now, thanks to the decline in the housing market, that house is worth significantly less than what you currently owe on it.  For one reason or another, you are unable to make your current monthly payments, and you default on the loan.  Now late fees and attorney’s fees are adding on and that balance is getting larger by the minute.  Sounds like a pretty bad scenario, and it is, but the government offers the everyday Joe a way out of this mess.  Ultimately, if you end up with more house than you can afford, then you can allow the lender to foreclose on the property and file for bankruptcy to wipe out any deficiency that may remain after the sale of the property.  But what assistance is there if you get “more” education than you can afford?  In short, there isn’t any.  Unlike the liability on your home, car, credit cards, and medical bills, the liability on your student loans cannot be discharged in bankruptcy.  Not only that, but let’s say something unforeseeable happens, you become disabled, and can no longer work.  You are collecting disability which is probably significantly less than what you are used to living on.  You would probably expect sympathy and understanding.  What do you get?  You get your student loan lenders attaching your social security check and taking up to 15% of what little money you do have.  This is a remedy that is not afforded to any other lender.  So what makes student loans so special?  Can it really be that your education is more valuable than your house or car or health?  It seems illogical that we would not receive any protection against huge student loan bills particularly when you consider the fact that you got the education to make a better life for yourself and that education can’t even provide you with a job to cover the minimum payment on the money you borrowed to get it.

Now comes the small light at the end of the tunnel.  There are programs out there aimed to assist people with paying back their student loans.  One such program is the Income Based Repayment (IBR) option which determines the amount of your payment based off of your income.  IBR is intended to help you maintain a reasonable standard of living while allowing you to pay off your loans at an affordable rate.  The best part about the program; if you do not manage to pay off your loans in a 25 (I believe they may have reduced this to 20 for new grads) year period, then they are forgiven.  Additionally, in some extreme circumstances an argument can be made for an undue hardship discharge in bankruptcy that would allow your student loans to be discharged with the rest of your debt.  If you are having a difficult time meeting your student loan obligations, contact the Law Office of Suzanne Szymoniak today to discuss your potential options.

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Steps to Guarantee Your Divorce is Final

Divorce can be a long and tiresome process.  Usually, individuals going through a divorce anxiously await the day that the Divorce Decree is handed down because they feel that their depressing saga has finally ended and they can now get on with their lives.  What they don’t realize is that often times the Divorce Decree is not the final step.

There may be many other important matters that need to be addressed after your divorce is finalized or you run the risk that the terms of the Postnuptial Agreement will be negated.  For instance, if you fail to remove the ex-spouse as a beneficiary of employer issued life insurance, he/she may collect despite provisions in the Postnuptial Agreement which provide that the ex-spouse should have no interest in life insurance proceeds or other property of the spouse at death.  Consequently, after a divorce, both parties should not only carefully review all beneficiary designations in life insurance policies, but they should also review their Wills, Powers of Attorney, Healthcare Directives and Living Wills and make any necessary changes.  Additionally, it is important to make revisions to retirement plans, IRA’s and joint accounts to avoid unintended consequences as well as expensive litigation.

As a final precaution, you also need to insure that the former spouse has no ability to charge obligations on any credit cards, lines of credit or other instruments which may result in your financial liability. Not doing so can result in costly litigation or even force you into bankruptcy in order to get out from under your ex-spouse’s debt.

So, when you think it’s finally over and you’ve got that hard earned divorce decree; think again, and be sure to look carefully at the details to be sure that all ties between you and your ex-spouse have been severed.

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Mortgage vs. Note

You may not realize it, but when you obtain a mortgage, you are actually signing two different legal documents.  The first document, the mortgage, gives the lender a security interest in the property that you are purchasing/refinancing.  It is this document which gives the lender the ability to foreclose on your property in the event of a default.  The second document, called the note, makes you personally liable for the debt.  It is the note that gives the lender the power to come after you personally for any outstanding balance in the event that the foreclosure and sale of the property does not payoff the outstanding balance on the mortgage (a common occurence in today’s real estate market where most properties are significantly underwater).  If you are behind on house payments and contemplating bankruptcy, it is important to note that the mortgage is not dischargeable.  If you are hoping to keep your house, you will have to cure any default and continue to make regular payments.  If you do not, the lender has the right to petition the court to be removed from the bankruptcy and to proceed with a foreclosure/sale.  But let’s say you decide you do not want to keep the property.  You want to walk away and get a fresh start.  Here is where it is important to recognize the difference between the two legal documents; while your mortgage cannot be discharged in bankruptcy, your note (i.e. personal obligation for the debt) is.  That means that by filing bankruptcy, you limit the lender’s rememdy to the sale of the property.  The lender gets whatever the property is worth up to the amount remaining on the mortgage, and you get to walk away with no remaing obligation to the lender.  For more information on how bankruptcy can affect you as a homeowner, contact the Law Office of Suzanne Szymoniak today.

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