Saving Your Home With Chapter 13 Bankruptcy

stop fcConsumer Reorganization Through Chapter 13

If you are behind on your mortgage payments, filing a chapter 13 bankruptcy may help you avoid foreclosure.  If you are behind on payments to the point where a foreclosure complaint has already been filed by your lender, filing a bankruptcy case will immediately halt it.  The moment a bankruptcy case is filed, something called the automatic stay is put into effect.  The automatic stay is a powerful provision of the Bankruptcy Code which prevents any creditor or party-in-interest from continuing litigation against you or depriving you of your property.

Chapter 13 bankruptcy also helps you repay your past due mortgage payments.  Often, once you are several months behind on mortgage payments, you lender may refuse to accept any payment less than the total amount of the arrearages plus penalties and interest as payment, and consider the payment of a single mortgage payment a partial payment.  This perpetuates the vicious cycle.  A chapter 13 bankruptcy case allows you to pay off any arrearages over a three or five year time period – making catching up far more manageable.  Often times, chapter 13 bankruptcy is the only practical option for those substantially behind on their mortgage payments.

There are other solutions for debtors with no other problematic and significant debt beyond mortgage arrearages.  Mortgage modification, an arrangement to mitigate the lender’s loss and lower your monthly mortgage payments, can serve as a solution as well.  Modification is a negotiation and loan restructuring process which back loads your mortgage arrearages and sometimes (though not always) lowers your monthly mortgage payment.  This process often extends the term of your loan allowing your even greater advantages than might otherwise be available in a chapter 13 case limited to five years.. 

If you are behind on your mortgage payments and have mortgage arrearages  in excess of what you can pay back, give us a call for a free consultation to discuss a solution based on your individual goals and problems with debt.

Bankruptcy Attorney or Mortgage Modification Attorney? Maybe Both.

foreclosureBankruptcy | Mortgage Modification | Loss Mitigation 

Bankruptcy is an option for consumer debtors who have fallen behind on their mortgage payments.  If your lender has initiated a foreclosure action or has requested that you short-sell your property or execute a deed-in-lieu of foreclosure, you may wish to consider other options that will permit you to remain in your home.

Most lenders offer loss mitigation or modification options.  Borrowers who qualify for mortgage modification may see their interest rates lowered, principal balances reduced or mortgage term extended so that the monthly payments become more manageable.  In some instances, lenders may be willing to recapitalize mortgage arrearages, rather than requiring the borrower to make a lump sum, cure payment.  Mortgage modification applications are highly structured and lenders typically will not render any decision without a package that is 100% complete with current versions of all documents requested.  While many borrowers attempt to modify their mortgage without the assistance of a lawyer, an attorney who practices in the area can be very effective.

Many courts, including the United States Bankruptcy Court for the Western District of Pennsylvania, sponsor their own loss mitigation programs.  Court sponsored programs have the advantage of a judge with the power to compel mortgagees to designate a single point of contact and to come to a timely decision when the modification application is completed.

A chapter 13 bankruptcy case is also a highly effective way to preserve an at-risk interest in real property.  Unlike chapter 7 bankruptcy, bankruptcy under chapter 13 of the United States Bankruptcy Code allows debtors with a regular source of income to repay their creditors some or all of what they are owed over a period of three to five years.  For debtors who have reasonable mortgage terms but who have fallen behind on their mortgage obligation and just need some time and space to catch up, a chapter 13 filing may be the answer.  When a debtor needs both time and better mortgage terms, a chapter 13 case, together with participation in a loss mitigation program might represent that debtor’s best opportunity to save their home and get a fresh start.

Behind on a mortgage obligation?  Don’t wait until your lender forecloses on you—get a free consultation with an experienced bankruptcy lawyer today.

 Robleto Law, PLLC

(412) 925-8194

 

© 2014 Robleto Law, PLLC | Pittsburgh Bankruptcy Lawyers

Robleto Law, PLLC Moves Into Its New Offices

Bankruptcy Law Practice Moves into Three Gateway Center.

IMG_0634On February 1, 2013, Robleto Law, PLLC moved into its new home at Three Gateway Center.  After almost three years in an older, less prestigious space, the lawyers and professionals at Robleto Law are very pleased to be settling into our new offices.  Three Gateway Center stands only footsteps from the Point State Park, market square, a “T” stop (Pittsburgh’s well-run light rail car system) and the numerous attractions of the cultural district.  The grounds of Gateway Center are also home to the Three Rivers Art Festival.

Most importantly, the new law offices are designed to more fittingly service our growing bankruptcy and commercial law practice.  Our clients appreciate our commitment to downtown Pittsburgh–both because of our proximity to Pennsylvania’s State and Federal Courts and because of our connection to one of America’s most livable cities.  In addition to larger reception and conference areas, we now have the flexibility to have meetings at a traditional conference table or with less formal, couch seating.  Our designers have strived to maintain the integrity and stately nature of a Pittsburgh bankruptcy law firm while allowing for greater comfort and flexibility.  We recognize that our clients are diverse–from youthful software and design companies to corporate executives.

Our move is a product of our growth and, for that, we thank our outstanding clients.  We are delighted to have outgrown our former space but we fully intend to maintain the professional connections with the many fine co-tenants of that building.  We also look forward to developing new relationships with the many law firms and professionals with offices in and around Gateway Center.

The professionals at Robleto Law remain committed to providing the high quality legal services our clients have come to expect.  We very much hope that our existing and past clients will drop in for a visit.

Robleto Law, PLLC | Three Gateway Center | 401 Liberty Avenue, Suite 1306 | Pittsburgh, Pennsylvania 15222

Pittsburgh Bankruptcy Attorneys.

Does Using Your Tax Return for a Bankruptcy Case Make Sense

How Applying Your Tax Return to a Bankruptcy Case Could be a Prudent Financial Planning Stragey

For many trapped in the cycle of credit card use and minimum payments, the question of how to use a tax refund is not a simple one.  Having access to cash is appealing.  For a short time at least, you will have ready cash on hand and you will be able to make the minimum payments on your credit cards.  On the other hand, you could also apply your tax returns to your credit cards and begin to chip away at your credit card debt.  The first path is almost never a sound one.  A tax refund is a once per year occurrence–the money will soon be gone but your credit card debt will remain.  Applying your tax refund to your credit card debt could make sense but it might not.  Let’s consider a couple of hypothetical situations.

First, let’s assume that you owe $5,000 in credit card debt with no other significant unsecured debt and you are current on all of your debt obligations.  If you receive a tax refund of $3,000 and you exercise the discipline required to plunk all of that down on your credit card obligations.  The result here could be good.  Your debt to income ratio will improve and you will be better situated to pay down the credit card debt over the coming months.

Second, let’s assume that you owe $15,000 in credit card debt and another $10,000 in unpaid medical bills.  You are consistently behind on your credit card bills and are routinely penalized with late fees and interest charges.  The same $3,000 refund will not put you in a better position to address your debts–rather it is something like dropping a teaspoon of water upon a raging fire.  Your financial position and credit score were poor prior to your receiving your tax return and will not be substantially improved by handing your tax return to your creditors.  Moreover, just as in the prior example, spending your refund on day to day living expenses offers no hope of long term improvement in your financial position.

Thus, in the first hypothetical, paying down debt with your tax refund is sensible.  In the second, it is not.

(412) 925-8194

Tax Return and Bankruptcy – A Viable Solution

The debtor in our second hypothetical, with $25,000 of unsecured debt and a $3,000 tax return could be better served by filing a chapter 7 bankruptcy case.  A case under chapter 7 of the United States Bankruptcy Code would allow that debtor to get a fresh start.  Most consumer chapter 7 bankruptcy cases last a few months and debtors never see the inside of a court room (rather, they simply meet with a trustee at a meeting of creditors that lasts only minutes).   While certain types of debt are not dischargeable (e.g., student loans, domestic support obligations and some tax obligations and criminal fines), most common unsecured debt (like credit card debt and medical debt) is dischargeable.

By using part of the $3,000 tax return to file a chapter 7 bankruptcy case, the debtor in our second hypothetical has a drastically improved debt to income ratio and more available cash from month to month.  That newly available cash flow can serve to improve quality of life and enable the debtor to begin to accumulate savings and prepare for retirement.  While the filing of a bankruptcy case does adversely affect one’s credit score, if your credit is already poor, filing a bankruptcy case can put you on the quickest path to rebuilding your credit by responsibly paying down your debts as they become due.  Contact a Pittsburgh Bankruptcy Lawyer today to find out whether a bankruptcy case could improve your financial future.

(412) 925-8194

© 2014 ROBLETO LAW, PLLC

We are a debt relief agency, we help people file for relief under the United States Bankruptcy Code.

Pittsburgh Bankruptcy Attorney

Party-in-Interest Standing to File a Plan In a Chapter 11 Bankruptcy Case

Who May File a Plan in a Chapter 11 Bankruptcy Case

The debtor in a chapter 11 case always has standing to file a plan of reorganization.  In fact, during the “exclusivity period,” only the debtor has right to file a plan.  The exclusivity period starts out as the first 120 days after the filing of the chapter 11 bankruptcy case or, in a small business case, the first 180 days following the filing of a bankruptcy petition.  Often, debtors seek extensions of their exclusivity periods.  While the requirements and timing for such motions vary between small business cases and chapter 11 bankruptcy cases that are not designated small business cases, extensions are routinely granted when debtors are diligently working toward resolving matters in order to file a confirmable chapter 11 plan of reorganization.

Filing a Chapter 11 Bankruptcy Plan After Exclusivity Has Lapsed

When the debtor’s exclusive right to file a plan of reorganization lapses or is terminated, any “party-in-interest” can file a plan of reorganization.  The term “party-in-interest” is not defined in the Bankruptcy Code but so many courts have taken up the question that bankruptcy attorneys have a good concept of its boundaries.  As mentioned, the debtor is always a party-in-interest with standing to propose a chapter 11 plan of reorganization.  The Bankruptcy Code also confers standing upon creditors of the debtor thus, outside of the exclusivity period, creditors have standing to file chapter 11 plans of reorganization.  Interestingly, the term creditor is so broadly defined in the Bankruptcy Code that any party with a claim against a debtor is considered a creditor.  A claim includes rights to payment and equitable remedies that have not been filed or reduced to judgment.  In fact, a party remains a “creditor” of a debtor even if the debtor vigorously disputes any liability to that creditor.

But party-in-interest standing goes extends beyond the debtor and its creditors and extends to any party whose interest could conceivably be affected by the confirmation of a chapter 11 plan.  Many courts have noted that the intent of Congress was to encourage greater participation in chapter 11 cases.  Effectively, party-in-interest standing is not a limit at all but, rather, an invitation to participate–the only real limit is the bare limit imposed by Article III of the United States Constitution.

To begin with, the debtor has the right to file a plan.  If exclusivity terminates, then any party-in-interest may file a plan of reorganization in a chapter 11 bankruptcy case.  To determine whether you may propose a plan of reorganization in a chapter 11 bankruptcy case and whether becoming a plan proponent makes sense, you should consult an experienced Pittsburgh Bankruptcy Lawyer.

(412) 925-8194

I Filed a Previous Bankruptcy Case, Am I Eligible for a Bankruptcy Discharge Now?

The Effect of a Past Bankruptcy Case on Subsequent Filings.

 

Many individuals who were debtors in a prior bankruptcy case and who fall upon hard times a few years later want to know whether they can file another bankruptcy case.  The answer to that question very much depends on several factors including (i) the timing of the prior bankruptcy case; (ii) the chapter under which the prior bankruptcy case was filed; (iii) whether the debtor received a discharge in that prior bankruptcy case; (iv) the chapter under which the debtor wishes to file a subsequent bankruptcy case; and (v) whether or not the debtor needs or expects a discharge.

 

If your prior bankruptcy case was dismissed with prejudice, generally, you will be unable to file another bankruptcy petition for a period of 180 days.  There are many reasons why a bankruptcy court could dismiss a case with prejudice but, generally speaking, when a debtor has acted in good faith but a bankruptcy court must still dismiss a bankruptcy case, the order dismissing the case will be without prejudice to refile.

 

Past Bankruptcy Filing Eligibility for a Discharge Under Chapter 7 of the Bankruptcy Code

 

If you have a received a prior discharge in a case under chapter 7 or a case under chapter 11 of the Bankruptcy Code, you are not eligible to receive another discharge unless 8 years have elapsed between the date upon which you filed the prior case and the date of filing of a subsequent bankruptcy petition.  If your prior discharge occurred in a case under chapter 12 or chapter 13 of the Bankruptcy Code, the waiting period is 6 years in most cases.  However, if in your prior chapter 12 or chapter 13 bankruptcy case you paid your unsecured creditors 100% of their allowed claims, you would be eligible for a discharge under chapter 7 without any waiting period.  Also, if in your prior chapter 12 or chapter 13 bankruptcy case, you paid your unsecured creditors 70% of their allowed claims, proposed that prior chapter 13 bankruptcy plan in good faith and it was your best effort, you will also not be held to the 6 year bar for a discharge in a chapter 7 bankruptcy case.

 

Past Bankruptcy Filing Eligibility for a Discharge Under Chapter 13 of the Bankruptcy Code

 

You are not entitled to receive a discharge in a case under chapter 13 of the Bankruptcy Code within 4 years of having received a discharge in a case under chapter 7, chapter 11, or chapter 12 of the Bankruptcy Code.  Once again, the waiting period is less for a prior case under chapter 13 of the Bankruptcy Code.  In that instance, you are barred from receiving a discharge in a chapter 13 case within 2 years of having received a discharge in a prior chapter 13 case.

 

As you can see, determining eligibility for a discharge when you’ve filed a prior bankruptcy requires careful attention to the facts of your case.  Additionally, even if you are not eligible to receive a discharge, you may still wish to file a bankruptcy case for other reasons.  For example, a person who has fallen behind on their mortgage payments may wish to file a chapter 13 bankruptcy case for the benefit of the automatic stay and to have the ability to repay the arrearages through a chapter 13 plan over a period of 3 to 5 years.  As with most bankruptcy questions, it is best to discuss them with an experienced bankruptcy lawyer during a free initial consultation.

 

Robleto Law, PLLC

(412) 925-8194

Preference Defense: Is it Worth the Fight?

After a business debtor files a bankruptcy case, its trade creditors are often sued for receiving preferential payments under sections 547 and 550 of the Bankruptcy Code.  These creditors didn’t do anything wrong, they just happened to accept a payment from the debtor within the 90-day period preceding the bankruptcy case for a pre-existing debt.  Often, these businesses will simply return those payments rather than pay to fight to keep them.  In fact, they may have very good defenses to these claw back claims.  In practice, even an imperfect defense is a good defense because of the nature of preference cases.

 

A preference case must be brought by way of adversary proceeding, that is a separate case, related to the bankruptcy case of the debtor which allegedly made the preferential payment.  A capable Pittsburgh bankruptcy lawyer defending a preference case will review all relevant defenses to assist in determining whether which preference defenses fit the facts of the case.

 

If you need to defend against a preference claim in bankruptcy, you may be able to attack the claim on its elements by arguing that (i) the transfer was not an interest in property of the debtor; (ii) that it was not made to or for your benefit; (iii) that the payment was not made for or on account of an antecedent debt which the debtor owed you before it made the transfer; (iv) that the debtor was not insolvent at the time it made the transfer; (v) that the debtor did not make the transfer within the 90-day period preceding the bankruptcy case (or the one-year period for payments to insiders of the debtor); or (vi) that the transfer did not enable you to receive more than you would have received in a hypothetical chapter 7 case.

 

Section 547 of the Code contains its own list of possible defenses to a preference claim.  Those statutory defenses provide safe harbors for certain would-be preference claims.  Those include circumstances where the creditor who received the payment at issue provided a contemporaneous exchange for the payment which enabled the debtor to receive new value.  Additionally, payments in the ordinary course of business, made according to ordinary business terms are shielded.  Also, certain circumstances involving security interests give rise to a preference defense.

 

Moreover, case law has given rise to other defenses to preference claims.  If the recipient of the payment acted as a passive conduit for funds which flowed through it to a third party, it may have a defense to a preference claim.  See Golden v. The Guardian (In re Lenox Healthcare, Inc.), 343 B.R. 96, 103 (Bankr. D. Del. 2006).  Likewise, if the debtor assumes an executory contract or unexpired lease pursuant to which a preferential transfer is made, a preference defendant may be able to defend on the basis that the debtor would have necessarily have had to cure that contract or lease in any event.  See Kimmelman v. The Port Authority of New York and New Jersey (In re Kiwi Int’l Air Lines, Inc.), 344 F.3d 311 (3d Cir. 2003).

 

If your business has received a demand for payment from a bankruptcy trustee or a preference complaint, you should promptly contact a Pittsburgh Bankruptcy Lawyer.

 

(412) 925-8194

 

We are a debt relief agency.  We help people file for relief under the United States Bankruptcy Code.

Debtor in Possession Financing and Chapter 11 Exit Financing

Exit Financing

“Exit financing” is a term used to describe new credit extended to a debtor-in-possession that allows it to fund its chapter 11 plan and exit its bankruptcy case. Thus, while a debtor must typically file a motion to enter into an agreement outside of the ordinary course of business (see 11 U.S.C. § 363(b)), the “exit” is made via the chapter 11 plan confirmation process. The real challenge then, would remain plan confirmation (and meeting the 16 requirements of 11 U.S.C. § 1129(a)).

Debtor in Possession Financing

A debtor-in-possession (“DIP”) in a chapter 11 case can also seek to obtain financing prior to plan confirmation. DIP financing is governed by 11 U.S.C. § 364. Section 364(a) allows a debtor in possession to obtain unsecured credit in the ordinary course of business (e.g., a DIP that has NET30 terms with a vendor can continue to order inventory from that vendor without first seeking court approval). Section 364(b) deals with unsecured credit outside the ordinary course of business–that requires the approval of a bankruptcy court, on notice and with a hearing but entitles the creditor extending credit to administrative priority status for repayment of its loan pursuant to 11 U.S.C. § 503(b)(1). Subsections (c) and (d) of section 364 deal with post-petition, secured debt. Subsection (c) addresses circumstances in which a DIP cannot get obtain credit on an unsecured basis. With court approval after notice and a hearing, a DIP can use one more more of the following tools to improve the position of its prospective lender: (i) a priority position over some or all administrative expense claims; (ii) a security interest in unencumbered assets of the DIP; and (iii) a junior lien on already encumbered, assets of the DIP. The Order granting authorization to enter into a loan agreement under 364(c) should explicitly address which of the incentives the lender is to be granted (and which if any administrative claims are subordinate to the lender). Subsection (d) allows a DIP to go even further to obtain financing and to prime the rights of existing lien holders notwithstanding protections those prepetition lenders might have in their loan documents. However, the ability to prime an existing lien is an extraordinary remedy. The DIP must show, not only that it would be otherwise unable to obtain credit, but also that it is providing adequate protection to the affected, subordinated lien holders. A DIP can adequately protected a primed lender by providing it with a replacement lien on other unencumbered property. However, when the effect of the DIP financing is merely to shift the risk of being unsecured or undersecured to the prepetition lender from the DIP lender, the court should deny the request for DIP financing. 3 Collier on Bankruptcy ¶ 364.05 (16th ed. 2013) citing In re Mosello, 195 B.R. 277, 293 (Bankr. S.D.N.Y. 1996). The burden of proving adequate protection of the affected lien holder is on the DIP. Id. In the end, DIP financing can be a very potent tool but it is vulnerable to many of the same challenges that a DIP proposing a chapter 11 plan that crams down on the rights of prepetition secured creditors (compare “adequate protection” required under section 364 to “realization… of the indubitable equivalent” in 1129(b)(2)(A)(iii) required to cramdown a plan over the objection of a secured creditor).

Bankruptcy Reaffirmation Agreement

What Exactly is a Reaffirmation Agreement?

A reaffirmation agreement is an agreement between a debtor in a bankruptcy case and a creditor through which the debtor agrees to continue to remain liable for the underlying debt and the creditor agrees to honor the terms of the agreement.  Typically these kinds of agreements only in exist the case of secured obligations (think car payments and mortgages).

When Does it Make Sense for a Debtor to Reaffirm a Debt?

The decision on whether to reaffirm a debt should not be taken lightly.  To start with, if a debtor doesn’t want to keep the property to which the debt is tied the answer is simple–don’t reaffirm the debt.  Instead, simply allow the creditor to take the asset back and have the debt discharged.

If you want to keep the asset, the question becomes a little more difficult.  In the case of an automobile loan, generally, if you have made your payments on time and you continue to make timely payments, you’re going to be able to keep the vehicle irrespective of whether you enter into an agreement reaffirming the car loan.  The difference is that if you reaffirm the debt and subsequently default on the loan, the lender can seek to collect a money judgment from you personally; if you do not reaffirm the debt but stop making the payments after the debt is discharged and your bankruptcy case is closed, the creditor’s only remedy is to repossess the vehicle.  For this reason, debtors’ lawyers and bankruptcy judges are apprehensive about allowing debtors to enter into reaffirmation agreements unless those agreements incorporate new terms, more favorable to the debtor (e.g., lower interest rate or reduction of the principal balance of the loan).

How Should a Debtor in A Bankruptcy Case Decide Whether to Reaffirm a Debt?

Because every situation is unique, debtors should have a serious conversation with their bankruptcy lawyers to determine whether it makes sense for them to reaffirm a debt.  Creditors nearly always want debtors to reaffirm their debts.  Debtors need to understand that by reaffirming a debt, they are giving up a signficant bankruptcy benefit–the discharge of their obligation to pay that debt.  For that reason, talking to a Pittsburgh bankruptcy attorney is the most prudent course of action.

 

Robleto Law – Free Consultation

(412) 925-8194

File Bankruptcy and Still Keep Your Car

Bankruptcy Lawyers in Pittsburgh

tend to hear the same question very often:  “Can I keep my car if I file a bankruptcy case?”  Typically, the answer is yes.  If you have $10,000 in credit card debt and you own a Ferrari, free and clear, the analysis changes but, in most cases, keeping the vehicle is possible.

Keeping a Vehicle in a Chapter 7 Bankruptcy Case

In Chapter 7, or “liquidation bankruptcy,” a debtor can typically keep at least one vehicle.  While exemptions vary by state, the Federal Exemptions, which are available to debtors in Pennsylvania, allow debtors to exempt up to $3,450 of their interest in a motor vehicle (spouses filing together each get their own exemption).  If you owe a loan on your vehicle, your “interest” in the vehicle is its value in excess of the amount you still owe.  For example, if you owe $7,000 on a vehicle that is worth $10,000, your “interest” in the vehicle is $3,000 which would make it fully exemptible under the vehicle exemption.  If your interest in your car is worth more than $3,450, you can also apply a “wildcard” exemption to cover the difference.  The wildcard exemption can be applied to any interest in property.  The value of the wildcard exemption varies from $1,150 to $11,975, depending on how much of the “homestead exemption” debtors need to use to protect their interest in their homes.

A rule of thumb is that, if you want to keep the car in bankruptcy, you have to keep the car payment current.  That rule is subject to some exceptions and variations.  If you’re badly behind on your payment, you can use a Chapter 13 bankruptcy case to pay the arrearages over time.  Interestingly, if you owe more on your car than it is worth, you can compel your lender to accept on the value of the vehicle.   There are some important limitations to this process, so you should talk to a bankruptcy lawyer in Pittsburgh to determine whether that process might make sense for you.

Keeping a Vehicle in a Chapter 13 Bankruptcy Case

Keeping a car in a Chapter 13, or “reorganization bankruptcy” follows the same set of rules that apply in a Chapter 7 bankruptcy case except that, under Chapter 13, debtors repay their creditors some or all of what they owe them over a period of three to five years.  Under Chapter 13, the exemption thresholds become less important to the “keeping the car in bankruptcy” inquiry.  Your car payment will be paid through your Chapter 13 plan.  The exemptions are not irrelevant in a Chapter 13 case.  The reason for this is what’s known as the bankruptcy liquidation analysis.  Generally, the rule for Chapter 13 cases is that, debtors must pay creditors at least as much as they would receive in a case under Chapter 7 if the debtors’ assets were liquidated.  This requires bankruptcy lawyers to imagine what would happen in a hypothetical Chapter 7 case.  If the vehicle is fully exempt, then there would be no sale proceeds available to pay unsecured creditors.  However, if a debtor owns a $100,000 Ferrari with no car payment and has $10,000 in credit card debt, that debtor would need to pay the credit card debt in full through the Chapter 13 plan.

In practice, the most common reason for filing a Chapter 13 case is to protect a house from foreclosure.  Generally, the arrearages are repaid over the plan period and the car is exempted just as it would be in a case under Chapter 7.  If the debtor has a car payment, that debtor would be required to continue making that payment over the life of the plan.

Contact a Pittsburgh Bankruptcy Law Firm today to answer your questions during a free initial consultation:  (412) 925-8194