You Deserve a Fresh Start in 2014

ImageThe New Year is a good time to evaluate your financial house and consider whether getting a fresh start by filing bankruptcy is the best option for you.

If you have too much debt or feel like you are way over you head in bills, bankruptcy may be right solution for you to get a fresh financial start in 2014.

Bankruptcy wipes out all credit card bills, medical bills, and personal loans. It even erases deficiencies on short sales and repossessed vehicles.

Filing bankruptcy initiates a Court ordered “automatic stay.” The automatic stay immediately stops your creditors from trying to collect from you. Creditors are immediately stopped from garnishing your wages, repossessing your car, or selling your house or other assets at a sheriff sale.

The first step is to make an appointment to meet with an experienced bankruptcy attorney to discuss your financial options. The consultation is free. I don’t judge my clients and always treat everyone with the respect they expect and deserve.

Stephen M. Dunne, Esquire has been consistently voted and named one of Pennsylvania’s Bankruptcy Super Lawyers by Law and Politics published by Philadelphia Magazine and Pennsylvania Super Lawyer for the years 2011-2013.

If you know someone who needs a fresh financial start in 2014, please tell them that I can help them make 2014 the year for a fresh financial start.

Call Today: 215-551-7109.

Detroit Bankruptcy – Pensions Aren’t Protected From Cuts

Retirees like Gwendolyn Beasley, 67 years old, who worked 34 years for Detroit as a library clerk has an annual pension of $13,085. Ms. Beasley’s pension could be decimated in the very near future.

A judge declared Detroit eligible for bankruptcy and ruled that pensions aren’t protected from potential cuts. Five months after the city filed for Chapter 9 protection, U.S. Bankruptcy Judge Steven Rhodes said Detroit was entitled to reorganize under bankruptcy law, describing his ruling as a “fresh start” for the city.

Judge Rhodes said Detroit’s public pension holders aren’t entitled to special protection from potential cuts – despite a Michigan state constitutional provision aimed at shielding pensions. “Pension rights are contract rights under the Michigan constitution” and contracts are at risk for cuts under federal bankruptcy law.

Detroit plans on unveiling a proposal in January 2014 to restructure its estimated $18 billion in long-term debt, which makes it the largest-ever municipal bankruptcy in U.S. History.

The city’s unfunded pension liability has been estimated at between $3.5 billion and $8 billion.  The pension funds would undoubtedly receive only a fraction of what they are owed. The pension cuts will have a devastating on city employees and retirees who hoped state law would protect their pensions.

Does Bankruptcy Erase Domestic Support Obligations?

EraseDebtWhat’s a Domestic Support Obligation?

A debt that is in the nature of alimony, maintenance or support of a spouse, former spouse or child of the debtor (now defined by the term “domestic support obligation” — often shortened to “DSO”) is not dischargeable in either a chapter 7 or chapter 13 bankruptcy case. See 11 U.S.C. §§ 523(a)(5); 1328(a)(2).

A debt owed to a spouse, former spouse or child of the debtor, that is not a DSO, but that is incurred “in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record” is nondischargeable in a chapter 7 case. See 11 U.S.C. § 523(a)(15).

What’s a Non-Domestic Support Obligation?

A non-DSO marital obligation encompassed by 11 U.S.C. § 523(a)(15) is dischargeable in a chapter 13 case. See 11 U.S.C. § 1328(a)(2) (incorporating by reference certain chapter 7 non-dischargeability provisions, but excluding § 523(a)(15).

The characterization of a debt as a DSO or a non-DSO marital obligation is a question of federal bankruptcy law. See In re Gianakas, 917 F.2d 759, 762 (3d Cir.1990). Generally speaking, when an obligation is derived from a marital settlement agreement entered into by the parties, determining whether the obligation is in the nature of alimony, maintenance or support, as distinguished from a property settlement, depends on the intent of the parties at the time of the settlement agreement.

Is the Domestic Support Obligation dischargeable?

Whether a domestic support obligation is in the nature of support so as to be non-dischargeable, as distinguished from property settlement, depends on the finding as to the intent of the parties at the time of the settlement agreement, which can best be found by examining three principal indicators:

  1. First, the court must examine the language and substance of the agreement in the context of surrounding circumstances, using extrinsic evidence if necessary;
  2. Because the language of the agreement alone may not provide a sufficiently conclusive answer as to the nature of an obligation, the second indicator is parties’ financial circumstances at the time of the settlement. The facts that one spouse had custody of minor children, was not employed, or was less employed in less remunerative position than the other spouse are aspects of the parties’ financial circumstances at the time the obligation was fixed which shed light on nature of obligation as support;
  3. Third, the court should examine function served by the obligation at the time of the divorce or settlement. An obligation that serves to maintain daily necessities such as food, housing and transportation is indicative of debt intended to be in the nature of support. Bankr.Code, 11 U.S.C.A. § 523(a)(5).

Guidelines that determine whether a marital obligation is in the nature of support

A leading bankruptcy treatise breaks out the three (3) Gianakas factors into a more expansive set of factors for a court to consider in distinguishing DSO’s from property division obligations:

  1. The labels in the agreement or court order;
  2. The income and needs of the parties at the time the obligation became fixed;
  3. The amount and outcome of property division;
  4. Whether the obligation terminates on obligee’s death or remarriage or on emancipation of children;
  5. Number and frequency of payments;
  6. Waiver of alimony or support rights in agreement;
  7. Availability of state court procedures to modify or enforce obligation through contempt remedy;
  8. Tax treatment of obligation.

4 Collier ¶ 523.11[6][a]–[h].

What happens if the court determines that the marital obligation is in the nature of support?

A DSO is granted priority status in a bankruptcy case. As such, it must be provided for in a debtor’s Chapter 13 plan. A debtor’s Chapter 13 plan “shall provide for full payment, in deferred cash payments, of all claims entitled to priority under the Bankruptcy Code.”

What happens if the court determines that the marital obligation is in the nature of a property settlement?

A determination that the marital obligation is in the nature of property settlement will result in the debt been treated as a general unsecured claim in the Chapter 13 plan. Most unsecured creditors are paid pennies on the dollar in a Chapter 13 case.

Rapper DMX files Bankruptcy

DMX (Born Earl Simmons) filed for Chapter 11 bankruptcy due to poor financial management. The Chapter 11 petition lists less than $50,000 in assets and $1 million to $10 million in debt. The New York native owes $1.24 million in child support and more than $21,000 on an auto lease.

Can Child Support be Erased?

No. Child support cannot be erased or legally discharged in a bankruptcy case but Chapter 11 bankruptcy does allow debtors to propose a reasonable repayment plan to cure the child support arrearage.

Why did DMX file Bankruptcy?

The State Department will not issue a passport to anyone that has more than $2,500.00 in child support arrearage. DMX has an upcoming international concert tour and the filing of the bankruptcy case allows him to get his passport back and travel abroad.

What happens in a Chapter 7 bankruptcy case?

What happens in a Chapter 7 bankruptcy case?

Chapter 7 bankruptcy cases are usually straightforward.  On rare occasions, complications arise if creditors take aggressive action, if the trustee thinks you are hiding assets, or if you want to challenge creditors’ claims.

Who can file?

Any individual who lives in the United States or has property or a business in the United States can file a chapter 7 bankruptcy. If you received a chapter 7 bankruptcy discharge within the past eight years, you are disqualified from receiving a discharge in chapter 7. A similar disqualification may also apply if you received a discharge within the past six years in a chapter 13 case in which your unsecured creditors were paid less than 70% of what they were owed.

 

What is the means test?

In 2005, Congress added the “means test” to the bankruptcy law to make it more difficult for wealthy consumers to file chapter 7 bankruptcy. Most consumers who file for bankruptcy are not affected by this change. If your income is below the median in Pennsylvania, you are protected by a “safe harbor” and not subject to the means test. The current median family income figures for Pennsylvania are available on the website for the Untied States Trustee Program at: http://www.usdoj.gov/ust.

What are the first steps?

The first step in a chapter 7 bankruptcy is completion of certain basic forms. These include a three-page initial “petition.” You will also need to file a certificate from an approved credit counseling agency.  A number of other forms must also be filed either at the same time of the petition or shortly afterwards. These include your statement of financial affairs, statement of intentions with respect to certain secured debts, statement of monthly income and means test calculations, copies of any pay stubs you received from an employer during the sixty days before filing your bankruptcy case; and a set of schedules listing all your debts, assets, income, and expenses. It is important that all of these forms be filled out completely and accurately.

What are common mistakes?  

A chapter 7 bankruptcy is often called a “liquidation” bankruptcy because the debtors assets are examined by the court appointed  trustee and any “unexempt” assets are typically sold for the benefit of creditors.  Frequently overlooked assets include tax refunds, child support arrearages, security deposits, pledged goods at pawnbrokers, personal injury claims, other legal claims, and the cash value of life insurance policies.

Is Bankruptcy the Right Choice for You?

1. Bankruptcy may be the easiest and fastest way to deal with all types of debt problems.Bankruptcy is a process under federal law designed to help people and businesses get protection from their creditors.

2. Most bankruptcy cases are complicated. You should consider getting professional help.Bankruptcy is a legal proceeding with complicated rules and paperwork. You may want to get professional legal help, especially if you hope to use bankruptcy to prevent foreclosure or repossession. Dunne Law Offices, P.C. provides a free consultation to help you decide whether bankruptcy is the right choice.

3. Bankruptcy temporarily stops almost all creditors from taking any steps against you. This assistance is provided by the “automatic stay” that arises as soon as you file the necessary paperwork at the beginning of a bankruptcy case. Foreclosures, repossessions, utility shut-offs, lawsuits, and other creditor actions will be immediately stopped.

4. Bankruptcy can permanently wipe out your legal obligation to pay back many of your debts. This benefit arises because of the bankruptcy “discharge” that you get for successfully completing a bankruptcy case.

5. When a bankruptcy does not wipe out a debt, a chapter 13 bankruptcy (a “reorganization”) gives you the opportunity to catch up on that debt. For example, if you are behind on a home mortgage or car loan, bankruptcy will not usually allow you to cancel the mortgage or lien and still keep the property without repayment. If you want to deal with debts of that type in the bankruptcy process, you will need to propose a chapter 13 repayment plan. That requires affordable payments from your income over a period of three to five years.

6. The initial fee for bankruptcy is presently $306 under chapter 7 and $281 under chapter 13. The fee can be paid in installments over a period of 120 days.

7. If you file bankruptcy in Philadelphia, you usually do not need to go to court.You will have to attend one meeting with the bankruptcy trustee (not with a judge). Creditors are invited but rarely attend. You will not usually have to go to court for your bankruptcy case unless something out of the ordinary occurs.

Bank Deposits Guaranteed Up to $250,000 – Maybe

Money!Congress created the Federal Deposit Insurance Corporation (FDIC) in 1933 to ensure taxpayers were not on the hook for losses to depositors.

Today, FDIC stickers in every bank in America proclaim “Each depositor is insured to at least $250,000.”

 Is it possible for bank depositors to take losses on their deposits? Yes.

 Banks insure their own deposits through contributions to an insurance fund. Banks and the general public both falsely believe that the government will “pony-up” the cash if the insurance fund is depleted and protect taxpayers from a loss on their deposits.

However, Congress has never enacted a provision in law stating that insured deposits are guaranteed by the full faith and credit of the United States.

Congress has never legally guaranteed deposits.

Congress wants people to have “confidence” in the banking system and adopted a joint resolution in 1982 stating that it was the “sense of Congress” that insured deposits were backed by the credit of the United States. However, this resolution never became legal binding.

Henry Steagall, chairman of the House Banking Committee described the situation succinctly “I do not mean to be understood as favoring a government guaranty of bank deposits,” he said. “I do not. I have never favored such a plan.”

Let’s hope the banking and government-debt crisis in Cyrus doesn’t happen in the United States.