Tag Archives: creditor

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.

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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.

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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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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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Illegal Collection Attempts

Despite what creditors might think, they are not allowed to do whatever they want to collect on their debts. There is not only a State Statute which limits how creditors can collect, but also a Federal Statute that is meant to protect individuals from illegal collection attempts. One example of what creditors are not permitted to do can be found in this article. But your creditor doesn’t necessarily have to be engaged in fraud to be in violation of the law. Some additional actions which could be a violation include: contacting the debtor at unusual times, calling the debtor’s place of business, continuing to contact the debtor after the debtor has indicated in writing that they refuse to pay or wish for the creditor to discontinue contacting them, threatening violence or harm to the physical person, reputation or property of any person, using obscene or profane language, or threatening to take action that cannot legally be taken or that is not intended to be taken. If you think that your creditor may be engaged in illegal collection attempts, contact the Law Office of Suzanne Szymoniak today. If your creditor is violating the law, they could end up paying you.



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Are You Judgment Proof?

My credit card company has received a judgment against me.  Now what?  Well, now the creditor has to find a way to execute that judgment i.e. collect on it.  The creditor can attempt to do this in a couple of different ways.

First, they can attach a lien against any real property you own, such as your home.   This does not mean that you will be thrown out of your home.  The lien will act as a cloud on your title that must be cleared before you can sell your home i.e. if and when you sell your home, the creditor will receive the value of the judgment with interest from the sale proceeds.

What if you don’t own a home?  The creditor can locate the money you have in your bank accounts and seize them.  If the creditor finds any money you have that is not exempt from seizure (in PA there is a general exemption of $300), he will use his judgment to garnish your bank account.  A garnishment is essentially a way to freeze money in a bank or financial account and have the funds paid directly to the creditor by your bank.

Another technique that creditors try to use is wage garnishment.  This is where the creditor requests that your employer pay them directly out of your paycheck a specified amount until the judgment is satisfied; however, any threat of wage garnishment by a
creditor in Pennsylvania is illegal.  Wage garnishment can only occur in very limited circumstances, such as: to pay off a judgment which relates to a divorce, support, a residential lease, federal and state taxes, union dues and health care insurance premiums.

Finally, creditors may try to execute and levy against your personal property including your vehicle.  This process is where the creditor uses legal process to enforce the judgment by seizure and subsequent sale of the personal property owned by you. This involves having a Deputy Sheriff place a levy on your personal property, making it available for a public auction; however, this option is costly and time consuming for the creditor and often times will not result in enough money from the sale to cover the judgment.  This is particularly true in the case of a vehicle that already has a balance owed on it to another creditor.  The
original creditor will have priority over the judgment creditor so unless there is enough value in the vehicle to cover the original creditor’s outstanding balance and the judgment, it will not be worth the creditor’s time or money to have the vehicle repossessed and sold.

In conclusion, creditors have a variety of ways of trying to collect on their judgments; however, enforcing and recovering on a civil judgment is not an easy task.  First the creditor has to find your assets, if there are any worth finding, and then jump through
the administrative hoops to seize that property.  Ultimately, between 80-85% of all legal judgments remain uncollected after 5 or more years; which can be good news for you since court judgments have a life span and must be effectively enforced before the expiration of the judgment.

So what should you do if you determine that you do have property that you need to protect?  The creditor may be willing to set up a voluntary repayment plan with you, allowing you to pay the debt at an affordable rate.  If you decide to negotiate a repayment plan
with the creditor, obtain a written agreement from the creditor stating that they will not attempt to execute on the judgment as long as you make the payments required under the agreement.  Another option, particularly if you have more than one creditor with a judgment against you, may be to file for bankruptcy protection.  If you file for bankruptcy, the creditor will have to discontinue their
attempts to execute on the judgment.

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