Bankruptcy

• • Under chapter 13, you as the debtor propose a chapter 13 plan that calls for a cure of secured debt that has fallen behind, payment in full of most back taxes (if any) and a dividend for unsecured creditors.

• • The standing chapter 13 trustee gets a commission, as a percentage of the money you pay into your plan.

• • You get the money for a chapter 13 plan by living on a stringent budget for at least 36 months.

• • • You must contribute 36 times your disposable income to your plan.

• • • You can stay longer in chapter 13 for up to 60 months, if you need more time to pay the arrearages.

• • The typical chapter 13 case involves a mortgage that has fallen behind, where the homeowner can resume payments, but where the lender wants a lump sum that the homeowner cannot pay all at once.

• • If chapter 13 applies to your situation, we will provide you with an animated PowerPoint ® slide presentation that adds details. Under chapter 13, the creditors do not vote, but the standing chapter 13 trustee will monitor your case closely.

• • The trustee’s approval is almost always required to get your plan confirmed by the Court. Once confirmed, your plan becomes binding on you and all your creditors.

• • IF YOUR CURRENT MONTHLY INCOME IS ABOVE THE MEDIAN INCOME IN YOUR STATE FOR A HOUSEHOLD OF YOUR FAMILY’S SIZE, THEN THE “APPLICABLE COMMITMENT PERIOD” IS 60 MONTHS. THIS IS MANDATORY. ALSO, YOUR DISPOSABLE INCOME IS DETERMINED BY THE MECHANICAL (ARTIFICIAL) CALCULATION OF THE MEANS TEST, NOT BY THE ACTUAL DOLLAR AMOUNTS IN YOUR BUDGET.

• • WE ANTICIPATE SUBSTANTIAL LITIGATION OVER THE “ARTIFICIAL” DETERMINATION OF DISPOSABLE INCOME BEFORE ALL ISSUES ARE FULLY RESOLVED.

• Chapter 12: This is called: “adjustment of the debts of a family farmer with regular annual income.”  This is rare, and will be explained in detail, if you live on a farm that you own, and need to consider bankruptcy. Chapter 12 works in many ways similar to the methods applicable to chapter 13.

• Chapter 7. This is called “liquidation.” Most of the changes made by the 2005 bankruptcy law apply to your eligibility to be a debtor under chapter 7.

• • In a chapter 7 case, you do not propose to pay anyone. You propose to keep all your things, or as much as you are allowed under your “exemption,” and just flush the creditors away.

• • If you have more property than the “exemption” allows, you might want to consider chapter 13.

• • If you have too much cash left after deducting your actual living expenses, the trustee or the Department of Justice, or any creditor could ask the court to throw out your bankruptcy case. Once again, you may wish to consider chapter 13.

• • It is our job to help you navigate these waters, and come to the best possible decision for you and your loved one.

• • Sometimes, in a chapter 7 case, you will have a mortgage or a car loan. These are typical “Secured debts.”[1] The new law gives you a limited amount of time to make up your mind if you are going to keep the asset. If you do decide to keep it, you are well advised to enter into a written “reaffirmation” agreement with the creditor. The reaffirmation agreement says, in very elaborate language, that you are going to pay that particular creditor in spite of the bankruptcy.  There are rules about reaffirmation agreements. You will see that Congress has put in some language to protect you from being bullied into a reaffirmation.

In any chapter in bankruptcy, an individual gets an “exemption,” a certain amount of property that you can keep away from creditors. In Pennsylvania, you can use the state or the federal exemption. The federal exemption is more generous, so it is used most of the time in Pennsylvania.[1]   You will see the exemptions in our proprietary PowerPoint® presentation. Most chapter 7 cases are “no-asset” cases, meaning that there is no money for creditors, and that you will get to keep all your things.  In case you lose your copy of our PowerPoint, here is a list.  In a joint case, the husband gets a full set of exemptions, and so does the wife.  The limit on the exemption is the “equity” in the asset. For example, if your car is worth $10,000, and the balance on your car loan is $9,000, you have equity in the car of $1,000. That part of the car’s value is exempt.

 [1] There are rare occasions on which the Pennsylvania exemption is better suited to a client’ situation... We will advise you accordingly.