Affording Your Bankruptcy

In every bankruptcy consultation, there comes a point where I know exactly what the potential client is thinking: “This all sounds great, I need to file bankruptcy, but what is this going to cost me?”  I am always up front with my legal fees.  I am one of the few attorneys out there that actually list what I charge on my website and will disclose them again here: For a typical Chapter 7 bankruptcy I charge $1,000, and for a typical Chapter 13 bankruptcy the charge is $3,000.  You can plan on there being about $350 on top of that in the form of a filing fee charged by the court and a couple of credit counseling classes you have to take.  I am definitely not the most expensive, but I am also not the cheapest; however, I do offer personal, professional, legal help, and you will work directly with me from day one until your case is discharged.

Affording Bankruptcy

So, back to the question that ever potential bankruptcy client is wondering: “If I am broke how am I going to pay you?”  It is a fair question, and below are a few suggested solutions to the problem:

1. Payment Plans.  I offer payment plans.  I do require a 20% deposit to get the case started and to officially hire me as your attorney.  You can then make payments on the remaining balance at your convenience.

One quick note, in chapter 7 bankruptcy cases the legal fees must be paid in full prior to your case being filed.  The reason being, if you owe me money at the time of your bankruptcy filing, I am now not only your bankruptcy attorney, I am also one of your creditors.  It creates a conflict of interest, and essentially, my fee gets discharged with the rest of your unsecured debts.  So the total fee needs to be paid prior to filing.

2. Use the Money You Are Saving. When we meet in a bankruptcy consultation I discuss with you not only what your debts are, but what your goals are, what property you would like to protect, and what secured debts (i.e. car, house) you will continue to pay.

If you have decided to surrender your home or to let that car you are upside down in go back to the bank, there is usually no reason to continue to pay on those secured debts leading up to your bankruptcy filing. The funds you save there can be used to take care of the legal fees and court costs associated with filing bankruptcy.

Additionally, I do occasionally get clients who are still trying to keep things afloat and are paying on all or some of their unsecured debts.  Once you decide that filing for bankruptcy is the right option for you, there is usually no reason to continue to make payments to the unsecured creditors, and that money can then be used to fund your bankruptcy.

3. Tax Refunds. During the spring of every year there is an uptick in bankruptcy filings.  This is largely due to the fact that people have a lump sum of money from their tax refunds that they can use to cover their bankruptcy costs.

4. Retirement Funds. I generally don’t recommend that clients use their retirement funds for their bankruptcy filing.  You will usually take a tax hit for early withdrawal, and further, those are protected funds, even during your bankruptcy.  However, in certain circumstances it is the only option.  The choice often comes down to filing your case or risking foreclosure, bank levy, or repossession of a vehicle, and a bankruptcy needs to be filed quickly.   So in some instances, it may be a necessary evil.

5. Help From Family. It is not unusual to have a family member help you pay for your bankruptcy; however, it is important to know that if a family member loans you the money that their debt is discharged in the bankruptcy.  If they gift you the money or if you voluntarily repay them down the road that is fine.

How Not to Pay for Your Bankruptcy

You cannot charge your legal fees on your credit card as such a charge would be considered fraudulent since you obviously have no intention of paying back the debt at the time that it is incurred.  This and other charges on your credit cards in close proximity to the filing of a case can raise red flags for the court, and potentially get you in some trouble down the line.

My bankruptcy consultations are absolutely free.  We can sit down, discuss your situation, and help you determine if bankruptcy is a good option for you.  If it is, I will help you work out a plan on how the bankruptcy costs can be paid and help you start moving forward with your case.  For more information, visit the Law Office of Suzanne Szymoniak today.

Terminating Utility Service for Failure to Pay Post-Petition Charges Not a Violation of the Stay

One factor that contributes to people filing for relief under the bankruptcy code is past due utility bills.  Upon the filing of a case, the utility company must discontinue its collection attempts on the old debt and continue to provide the Debtor with services; however, this protection is only applicable to the pre-petition portion of the Debtor’s bill.  All charges incurred since the date of filing must be paid if the Debtor does not want his/her service to be discontinued as was the case in In re Weisel (428 BR 185 – Dist. Court, WD Pennsylvania, 2010).

In the Weisel case, the Debtors included a pre-petition debt from Dominion Gas in the amount of $1,203.40.  As is customary with utility providers, upon the filing of the case, Dominion closed the Debtors’ pre-petition account which included all utility charges prior to the date of filing.  Dominion then opened a post-petition account for the Debtors with an account balance of $0. In conjunction with opening the new account, Dominion requested a post-petition deposit of $217.00.  After paying $215.00 towards the requested deposit, Dominion continued to provide service to the Debtors.  Over the next year and a half, Debtors made sporadic payments to Dominion and accumulated a post-petition delinquency of $1,157.09.  After providing Debtors proper notice pursuant to state law, Dominion terminated gas utility service to the Debtors’ residence.  Debtors then filed a motion against Dominion alleging that Dominion violated the Bankruptcy Code by terminating their gas service without obtaining relief from the automatic stay.  The Debtors were unsuccessful.

Section 366(a) of the Bankruptcy Code provides the general rule that a utility may not alter, refuse, or discontinue service to a debtor “solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due.”  However, Several courts have permitted termination for failure to make post-petition payments concluding that the use of the word “solely” in § 366(a) implied that a utility may refuse to furnish services on grounds other than the commencement of the bankruptcy case or because of outstanding pre-petition debts.  Specifically, in Begley v. Philadelphia Elect. Co., the court concluded that:

“The restriction on termination in section 366(a) bars only those terminations which issue “solely on the basis” that a debt incurred prior to the bankruptcy order, was not paid when due. Thus, by implication, termination for failure to pay post-petition bills would not seem to be barred by section 366(a) … This reflects an understanding that the utility will be allowed to commence termination procedures once a post-petition payment is missed, despite the prior security or “assurance” deposit.”

Begley v. Philadelphia Elect. Co., 760 F.2d at 49-51.

In conclusion, although bankruptcy can be a useful tool when it comes to past due utility bills, if you wish to continue your service, it is imperative that you make timely payments on any post-petition utility bills.  Therefore, when you are working with your bankruptcy attorney on the income and expense portion of your bankruptcy petition, make sure that there are enough funds to cover your future utilities.  Otherwise, your utility company will exercise its legal right to terminate your service.  For more information, contact the Law Office of Suzanne Szymoniak.

What Should I Bring to My Bankruptcy Consultation?

You have finally taken that first crucial step and scheduled a consult with a bankruptcy attorney.  Now what?  In order to get the most out of your free consultation, you want to come prepared.  Below is a list of items you will likely want to bring with you to your first meeting:

–  A recent credit report:  This will help your attorney get an overview of how much and what kind of debt you have out there.  Prior to your consult, you can pull a free credit report from http://annualcreditreport.com.  This is a completely free site that does not require that you sign up for a membership in order to view your free report.

–  Six months worth of paystubs:  In order to determine if you can qualify for a Ch. 7 or what disposable income you might have for a Ch. 13, your attorney must complete a means test for you.  In order to do so, s/he needs to know what your income has been for the past six months.  If you have not received paystubs over the past six months, bring any documentation you may have regarding your income sources during that time period.

–  Four years worth of tax returns:  The trustee in your case will want to see that your federal and state taxes have been filed over the last four years.  Additionally, your attorney will need to disclose your annual income for the two years prior to the filing of your case.

–  Documentation regarding recent law suits:  Have you been sued by one of your creditors or another party within the last two years?  If so, make sure you bring a copy of the suit papers for your attorney to review.

– Certificate of Credit Counseling:  If you are serious about filing and believe that you will be doing so in the next six months, you can get a jump on things by completing the required credit counseling course.  You can complete the course and obtain your certificate for a $5 fee at http://www.consumerbankruptcycounseling.info.

–  Completed Client Questionnaire:  Most attorneys will have a questionnaire for you to complete that will allow them to prepare your bankruptcy paperwork.  Some attorneys may have this document available online or can email it to you when you call to set up the initial consult.  It can help to expedite matters to have the paperwork completed prior to your initial meeting; however, if you are on the fence about filing, there is no need to complete the additional paperwork until you know for sure that you wish to proceed.

–  A check:  Although most attorneys will offer a free initial consultation, in order to get the ball rolling on your bankruptcy, the attorney will request some sort of retainer.  Usually, a minimal payment towards the attorney fee for the bankruptcy will be sufficient for the attorney to permit you to begin directing your creditor calls to him/her and for him/her to begin the preparation of the necessary paperwork.  Of course, with regards to a Ch. 7, the attorney will not be able to file until the full attorney and filing fee has been received.  Otherwise, s/he runs the risk of discharging the balance that is owed for his/her services.

For more information regarding bankruptcy or to schedule a free consultation, please contact the Law Office of Suzanne Szymoniak.

Tips to Help You Avoid Foreclosure

Have you fallen behind on your mortgage and are facing a pending foreclosure?  Before packing your boxes and resigning yourself to finding a new place to live here are a list of options that are available to help you avoid foreclosure?

Nowadays, due to the high unemployment rate, an increasing number of people are facing a possible foreclosure on their property.  But why wait when you can do something about it now?  If you want to keep your home, there are many possibilities that can help you lighten your burden.

Here are 6 tips that can help you avoid foreclosure and its ramifications:

Tip #1: Request a Loan Modification

You can request a loan modification from your lender.  For this, you will be required to submit necessary documentation to a loan officer.  The loan officer will review your request based on financial statements that you submit.  The loan may be modified according to your paying capabilities.  While the request for modification is pending, your lender should not proceed with a foreclosure action; however, large companies are rarely aware of what their different divisions are doing.  Therefore, if you do receive a foreclosure notice, you should contact the foreclosure department immediately and inform them of the pending modification.  Once all of your documentation has been submitted and reviewed, you will be notified by the lender if your loan modification is approve, if not they may suggest a short sale which is another option discussed below.

Tip #2: Refinance to pay off your home loan

Refinancing means you are paying off an existing loan with the proceeds from a new loan.  Homeowners are allowed to file a second loan for the same property for reasons such as paying the first loan, switching between fixed rate and adjustable rate, and extending the term of payments.  In order to decide if this is worthwhile, the savings and interest must be weighed against the fees associated with refinancing.  If there is a pre-payment penalty attached to the existing mortgage (i.e. you are required to pay a penalty for paying off the mortgage early), refinancing becomes less favorable because of the increased cost to the borrower at the time of refinancing.

Another issue you may encounter with refinancing is that if you are facing foreclosure, then you have probably missed several mortgage payments.  This information will be reflected on your credit report, and in the current credit climate, lenders may be unwilling to lend to you; however, if you have the time, it cannot hurt to speak to an experienced loan officer to see if this is a possible option for you.

Tip #3: Enrol in Forbearance and Repayment Plans

Forbearance agreements between lender and borrower reduce or suspend payments for three to twelve months.  During which time, the lender agrees not to pursue foreclosure on the property. The homeowner and the lender agree on a plan that is best for both parties.  Generally, the repayment plan includes the normal monthly payment along with a payment to repay the delinquent amount.

Tip #4: Attempt a Short Sale Rescue

Short sale is a process wherein the lender and the borrower will have an agreement to sell the property at a moderate loss to the borrower.  The lender will handle the short sale which includes the negotiation with the buyers.  But in this scenario, the borrower may be required to pay the loan balance which is called a deficiency.  If for some reason the lender agrees to waive the deficiency payment, the amount waived will most likely be considered taxable income for that year and will have to be reported on your next tax return as such.

Tip #5: Chapter 13 Bankruptcy

If the reason for your mortgage delinquency was due to a loss of income issue that has now been resolved, and you feel that you could pay the mortgage and any delinquency if you could just spread out the payments, a Chapter 13 bankruptcy may be the right option for you.  The filing of a Chapter 13 puts a stop to any pending foreclosure action/sheriff sale and allows you to keep your mortgage current while making monthly payments on the delinquency over a period of three to five years.

Tip #6: Chapter 7 Bankruptcy

If you have decided that you can no longer afford the home and need to walk away, you may want to consider a Chapter 7 bankruptcy.  In Pennsylvania, your lender is allowed to get a judgment against you for any deficiency that may exist after your property is sold at the sheriff sale.  With home values plummeting, this is often the case with foreclosed property.  A Chapter 7 will discharge any mortgage deficiency as well as all of your other unsecured debt.  Another bonus is that the debt that is discharged in a Chapter 7 is not considered taxable income and will not have to be reported on your future tax return.

Foreclosure is one of the biggest nightmare that homeowners are experiencing today.  If you are falling behind on payments, then it is to consider you options.  If you need help deciding what the right option for you is, please contact the Law Office of Suzanne Szymoniak for a free consultation.

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.

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.

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.

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.

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.

Utilities in Bankruptcy

Often times, individuals contemplating bankruptcy may have fallen behind on their gas, electric or other utility payments.  One of the benefits of bankruptcy is that filing can keep the company from discontinuing your service; however, there is one drawback that people do not immediately consider.  Upon the filing of your case, your utility company must close your current account with them as they are no longer permitted to collect on that account due to the bankruptcy stay.  They must then open you a new account in order to continue providing you with service.  The good news is that any balance owed on the old account will be discharged with the rest of your unsecured debt.  The bad news, however, is that in order for the utility company to open you the new account, they will require that you pay a security deposit.  This is often times an added expense that individuals do not account for when they are preparing to file for bankruptcy.  One company that consistently uses this method of closing your old account, opening a new one, and charging a security deposit is Duquesne Light, but don’t be surprised if you receive similar notices from your other utility companies upon the filing of your case.  In short, when you are trying to determine the cost of your bankruptcy case, don’t forget to account for some additional expenses caused by the need to pay these security deposits to maintain your utility services.  For more information on costs associated with bankruptcy, contact the Law Office of Suzanne Szymoniak today.