Taking the Mystery and Mean Away From the Bankruptcy Means Test

Means Test and Chapter 7 Bankruptcy

It Has Never Been Easier to Determine Whether You Qualify for Relief Under Chapter 7 of the United States Bankruptcy Code in Pittsburgh.

Means TestIn 2005, Congress put in place very substantial changes to the United States Bankruptcy Code through an amendment known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).  The BAPCPA amendments set new requirements for eligibility to be a debtor under chapter 7 of the Bankruptcy Code and to receive a discharge under chapter 7.  Importantly, debtors must now undergo a means test if their income exceeds the then-applicable median income for consumers of debtors’ household size in the state in which they reside.

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Eligibility for Chapter 7 Bankruptcy – Median Income Analysis

Debtors whose income does not exceed the relevant median income need not undergo further means testing.  Median incomes information is calculated and published by the United States Census Bureau and median income data is adjusted periodically.  The Office of the United States Trustee publishes median income information on its website.  As of the date of this entry, the median income applicable to debtors in the Commonwealth of Pennsylvania with a household size of one is $50,501.  A household of two in Pennsylvania can earn up to $60,508 without further means test analysis.  A three-person family in Pennsylvania has a median income of $74,083.  With four people the Pennsylvania median income is $89,690 and increases by $8,400 for each additional member of the household.
Median Household Income in the United States: 2015

[Source: U.S. Census Bureau]

The Bankruptcy Means Test Exception Applicable to People with Primarily Business Debts

Individuals whose debts are primarily business debts are excused from the means testing analysis.  The means test analysis under section 707(b) of the Bankruptcy Code applies to individual debtors whose debts are primarily consumer debts.  A Pittsburgh bankruptcy lawyer will be able to help you make the determination of whether your debts are primarily consumer debts or whether you may be exempt from further means testing because of the primary nature of your indebtedness.

The Chapter 7 Means Test and the Presumption of Abuse

The chapter 7 bankruptcy means test is codified in section 707 of the Bankruptcy Code and individual chapter 7 bankruptcy debtors in Pittsburgh and throughout the United States must submit an Official Form 122A-1, Chapter 7 Statement of Your Current Monthly Income.  Debtors must disclose information relevant to their income and household size to determine whether they need to complete the means test.  The means test itself is incorporated into Official Form 122A-2, Chapter 7 Means Test Calculation.  Debtors must draw income data for the means test from the income during the six-month period preceding the filing of their bankruptcy cases.  The Bankruptcy Code permits debtors to subtract from their household any portion of the income of a non-filing spouse that is not dedicated to the payment of household expenses or expenses of debtors’ dependents.  The means test also provides that certain expenses be deducted from a debtor’s adjusted current monthly income to determine monthly disposable income.  That monthly disposable income is then multiplied by 60 to determine a debtor’s five-year disposable income.  If a debtor’s disposable income over five years is less than a certain threshold value (currently $7,700), then the presumption of abuse does not arise.  If the five-year income exceeds the threshold value and a cap value (currently $12,850), then the presumption of abuse arises but the debtor may still elect to complete a statement of special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.  A showing of special circumstances may justify continued eligibility for relief under chapter 7.  If a debtor’s five-year disposable income is between the threshold and cap values, the presumption of abuse will not arise unless the five-year disposable income is at least 25% of the debtor’s total nonpriority unsecured debt.

Close Call on the Means Test?  Discuss it with a Pittsburgh Bankruptcy Lawyer!

The increase in the administrative cost and duration of a chapter 13 bankruptcy case from a chapter 7 bankruptcy case is considerable.  In many cases a chapter 13 bankruptcy may be warranted but for other individuals a fresh start under chapter 7 of the Bankruptcy Code will offer the optimal path away from financial distress.  A free consultation with a Pittsburgh bankruptcy attorney could help you understand all of your bankruptcy nonbankruptcy options before making any decision.

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Bankruptcy in Pittsburgh – I Want to Keep My Car!

File Bankruptcy and Keep the Car

bankruptcy keep my carCan I File Bankruptcy and Still Keep My Car – Talk to a Pittsburgh Bankruptcy Lawyer Now!

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If you’re considering filing a voluntary bankruptcy case under chapter 7 of the Bankruptcy Code or entering into a repayment plan under chapter 13, you may be interested to know how a bankruptcy case might affect your vehicle loan.  Most workers need their vehicles just to bring themselves to work and back.  In most Pittsburgh bankruptcy cases, people can file bankruptcy and keep their cars.  Generally, as long as one continues to pay on his or her vehicle, she may retain it.

Chapter 13 Bankruptcy.  If you’re behind on your car payment, you may wish to use chapter 13 to retain that vehicle.  Under chapter 13, debtors may pay into a plan over a period of three to five years and, during that time, they may cure and reinstate certain loan balances.  In most cases, even when a debtor is substantially behind on a vehicle payment, chapter 13 may still offer a pathway to keep that car.

Chapter 7 Bankruptcy.  Often debtors are not in a position to repay creditors but still want to keep their automobiles.  In those cases, they may usually retain them as long as they keep current on their vehicle payments.   Particularly in this context, its very important to know whether creditors are secured or unsecured and whether they may have priority claim status.  In order to ensure that you are able to retain your interest in your vehicle, contact Robleto Law today.

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We are a debt relief agency.  We help people file for relief under the United States Bankruptcy Code.  (c) 2017 Robleto Law PLLC  |  Pittsburgh Bankruptcy Law Firm

 

Bankruptcy May Help Get Your Repossessed Vehicle Back

Was Your Vehicle Repossessed in Pittsburgh Before You Were Able to File for Bankruptcy Relief?

Making ends meet in tough times can be difficult enough even before your vehicle is repossessed.  Without your vehicle, you may find it difficult to get to work or a job interview making your troubled financial condition even worse.  If you have experienced a vehicle repossession in Pittsburgh, you may be able to get your car back for good by filing a voluntary petition for relief under the United States Bankruptcy Code.

car repossession

How Vehicle Repossession Works

Vehicle sales in Pennsylvania are typically financed through a retail sales installment contract.  That contract provides the lender with a security interest in the automobile until the loan is paid off.  If a borrower cannot or does not pay regular monthly payments and falls behind, the lender may exercise the legal right to take possession of their collateral and sell it.  Under the Uniform Commercial Code, lenders are required to send notices to borrowers following repossession, advising them of the disposition of the vehicle and what the borrower must do in order to get the vehicle back.  Borrowers may have the right to cure their loans meaning bring the loan current by paying the current and past due amounts owed along with the costs of repossession.  Other borrowers may find that the only rights listed in the notice they received from their lender is a right to redeem the vehicle meaning payment of the entire amount still owed to the lender.

If the lender sells a repossessed vehicle, it must send the borrower a second notice with information about the sale and whether there was a surplus or if the borrower owes a deficiency to the lender.  The form and content of the notices issued by the lender are very important and the failure of a lender to provide notices as mandated by the statute can give rise to a claim for damages against the lender.

Getting Your Repossessed Automobile Back After Filing Bankruptcy

Vehicle lenders are often familiar with the bankruptcy process and will make arrangements with your bankruptcy lawyer for the prompt return of your vehicle.  In certain cases, your bankruptcy lawyer may need to petition the bankruptcy court for the turnover of your vehicle to you.  You will still be required to pay the amounts due to your lender but you may be able to do that over a period of three to five years in a case under chapter 13.  Additionally, in certain circumstances, you may be able to “cramdown” on lender in a case under chapter 13 and compel it to accept only the value of the vehicle even if you owe considerably more than the vehicle is worth.  In a case under chapter 7, you may also be able to redeem your vehicle for less than the amount you owe.  In Pittsburgh, your bankruptcy lawyer may be able to arrange for you to receive a loan for the value of the vehicle that could save you a considerable amount of money, giving you even more freedom to make the most of your fresh start.

Talk to Your Pittsburgh Bankruptcy Lawyer to Determine if You Can Get Your Repossessed Vehicle Back by Filing a Bankruptcy Case

Whether you can get your vehicle back by filing a bankruptcy case may depend on several factors.  Timing is very important.  The filing of your bankruptcy case will give rise to the “automatic stay” which will prevent the lender from selling your vehicle.  However, if you file your bankruptcy case after your lender has sold your vehicle, you may find that you will be unable to get it back.  If your car is repossessed in Pittsburgh, you should call an experienced bankruptcy lawyer immediately.  Give yourself the best chance to get a fresh start and get back on your feet.  Expert bankruptcy professionals may be able to help you get your car back quickly through a bankruptcy case.

How Will Bankruptcy Affect My Credit?

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Importance of Credit.

Effect of Bankruptcy on Credit

Understand the impact that filing a bankruptcy case could have on your credit score.  You may be surprised.

Understanding the Interplay Between Your Credit Score and Filing a Bankruptcy Case.

Generally, individuals considering the to file a voluntary bankruptcy petition already have at least some issues with their credit.  Pittsburgh bankruptcy lawyers generally discuss those credit issues during a free initial consultation with their clients.  Especially when it comes to chapter 7 bankruptcy cases, individuals typically consider filing to escape a dire financial situation.  Even consumers who pay their minimum payments on time may have poor credit scores because of very high debt to income ratios.  Often the maxed-out credit cards are accompanied by several late payments.  Worse, many consumers give up on even the minimum credit card payments but still remain reluctant to file a bankruptcy case.

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Filing a Bankruptcy Case Might Actually Improve Your Credit.

The filing of a bankruptcy case is an adverse credit event which, in isolation, might appear to result in a reduction to your credit score.  However, continued default on credit facilities, non-reduction of debt and no exercise of credit could be worse than taking the affirmative step a bankruptcy case to address your financial issues.  A bankruptcy case could be the quickest way to correct a badly skewed debt to income ratio.  Your credit score might also be dramatically improved when certain of your creditors’ claims are retired.  Because there are rarely quick-fixes for credit issues, it is often helpful to consider how your financial condition might change within the next 24 months.

If you’re waiting to find out how your credit score might change after a bankruptcy case, you owe it to yourself to have a free initial consultation with an experienced Pittsburgh bankruptcy lawyer.

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Refusing to File Bankruptcy Could Delay Your Fresh Start.

For consumer debtors, chapter 7 bankruptcy usually means a fresh start after getting a discharge.  The chapter 7 process moves quite quickly in comparison to the timeline of a chapter 13 case.   In chapter 13, debtors  pay a portion of what they owe to their creditors over a period of three to five years.  It doesn’t take long for debtors find that the chapter 13 plan period is not a prison sentence.  When a chapter 13 plan is confirmed it strikes a new deal between a debtor and her creditors.  At the successful conclusion of that chapter 13 plan, debtors are rewarded with a completion discharge (in fact, the chapter 13 discharge is actually more broad than the quick chapter 7 discharge ).

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A Pittsburgh Bankruptcy Lawyer Can Help You Establish Your Path Forward.

For many people in financial distress, the path outward is not entirely clear.  People are sometimes overcome by the weight of their then-present conditions and can’t see forward to a reasonable future as careful stewards of their own assets.  In other cases, people financially incapable of caring for themselves could overcommit to their responsibilities.  For a true idea of of your financial future, please contact us for a free initial consultation.

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We are a debt relief agency.  We help people file for relief under the United States Bankruptcy Code.  We are proud to have continuously expanded our clients, reach and success rate.   Please contact us if you have a challenging bankruptcy or commercial law concern.  We are excited to review your condition with you.

 

Will the President Elect’s Experiences in Bankruptcy Court Help to Expand Access to Bankruptcy for Consumer Debtors in Pittsburgh?

donald-j-trump-1271634_960_720A Pittsburgh Bankruptcy Lawyer Considers Whether a New President Might Stir Changes in Bankruptcy Law

When Donald Trump takes the oath of office, he will not be the first executive to have resorted to our nation’s bankruptcy law. Some of our most venerable Presidents have been debtors in bankruptcy cases including Thomas Jefferson, James Monroe and Abraham Lincoln. However, the shape of bankruptcy law has changed dramatically since the days of Lincoln. In fact, the United States Bankruptcy Code underwent a very dramatic overhaul in 2005 with its modification through the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

BAPCPA set in place certain restrictions for consumer debtors seeking a fresh start. Such debtors are required to undergo a course in credit counseling prior to filing a voluntary bankruptcy petition. The course must be administered by an approved agency and may vary in cost from approximately $15 to $25. The credit counseling course can generally be completed in-person or by telephone but many people find it most convenient to complete the course online. Once the course is completed, the approved counseling provider will generate a certificate of completion which it will direct to the bankruptcy lawyer for filing on the first day of the bankruptcy case.   In certain rare instances, debtors may file their bankruptcy case without completing the course and then submit a certificate of exigent circumstances which could excuse tardy compliance with the pre-petition credit counseling rule.

BAPCPA also brought with it a means test that sometimes creates a rebuttable presumption of abuse when debtors in cases under chapter 7 have monthly income in excess of relevant median income for their state. Often in those cases, the Office of the United States Trustee will issue an inquiry letter upon such debtors or their counsel requesting support for the determination that a particular chapter 7 filing is not abusive.

As a matter of policy, the present design of the Bankruptcy Code encourages filing cases under chapter 13 rather than chapter 7. Through chapter 13 bankruptcy cases, debtors may pay some or all of their debts over a period of three to five years. A chapter 13 “reorganization” bankruptcy has some special attributes and it may often present a more favorable outcome for people in certain financial positions. For instance, chapter 13 may offer the best hope for a person attempting to save their home from foreclosure.

The Bankruptcy Code also places strict restrictions upon debtors’ eligibility to for a discharge for a period of time after having received a bankruptcy discharge in a prior case. The law also severely limits the applicability of a bankruptcy discharge to student loan obligations and to many kinds of tax claims. If the political appetite to expand debtors’ rights existed, even very modest adjustments to the Bankruptcy Code could result in substantial relief for many consumers.

Whether the President Elect’s bankruptcy experience will affect the development of our nation’s bankruptcy laws is not clear. A less polarized Congress could be better positioned to pass new legislation. Moreover, filing the many judicial vacancies of the United States Courts will affect how the law is interpreted—not least when at least one of those appointments will be to the United States Supreme Court. For the time being, Pittsburgh bankruptcy lawyers will anxiously monitor the development of bankruptcy law.

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

Bankruptcy Rights upon Moving to a New State

How Moving to Another State May Affect Your Bankruptcy Casebankruptcy-moving

People considering filing a bankruptcy case who have recently moved to another state or are planning an out of state move may need to address special considerations during the bankruptcy planning process.   Out-of-state moves can affect bankruptcy filings in at least two major ways:  the venue in which debtors may file their bankruptcy cases and the law governing how much property those debtors can keep out of the reach of their creditors.

On the question of venue, there are two factors that determine where a debtor may file a bankruptcy case.  Jurisdiction for a bankruptcy case may validly hinge upon the location of any of debtors’ domicile, residence, principal place of business or principal assets in the United States.  That’s the reason why so many large companies that seem to have little or no connection with Delaware or New York are able to file chapter 11 bankruptcy cases in bankruptcy courts in those states.  However, the second part of the venue question is one of timing.  If the relevant location was not constant for the six-month period preceding the filing of the case, jurisdiction is only appropriate in the districts where those things existed for the majority of that six-month period (or, if there were more than two jurisdictions, the one where those things were for the longest portion of that 180-day period).  For many debtors in cases under chapter 7 and chapter 13, the practical impact is often that they must have lived somewhere for longer than three months before they are able to file a bankruptcy case their new home state.

Exemption rights are the legal rights available to debtors under the Bankruptcy Code to shield property from their creditors. The nature of those substantive rights depends on the debtors’ residence.  Congress left it to the individual states to determine whether a state’s residents could chose between the federal or state exemption schemes or were limited to either the state or federal exemptions.  Debtors are entitled to the exemption law of the state in which they have been domiciled for the two-year period preceding the filing of their bankruptcy cases.  However, if a debtor has not lived in one state for the entirety of that two-year period, the debtor’s exemptions will be determined according to the law of the state in which his or her domicile was located for the majority of the six-month period preceding the two-year period before the case was filed (whew!).

In most instances, Pennsylvania residents who file consumer bankruptcy cases can chose between the state and federal exemptions. The election of an exemption scheme is an important and consequential decision. An experienced bankruptcy lawyer can help with that selection in order to maximize your exemptions rights.

For a free initial consultation with a Pittsburgh bankruptcy attorney, contact Robleto Law, PLLC.

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

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

 

Aurelius Robleto Speaks At 21st Annual Bankruptcy Institute

Bankruptcy for Small Business Debtors

Special Rules Apply to Debtors in Small Business Cases

On September 9, 2016, Aure Robleto participated with a panel of speakers at the 21st Annual Bankruptcy Institute in Pittsburgh.  The event is conducted annually by the Pennsylvania Bar Institute and consistently draws many of the top bankruptcy practitioners in Pittsburgh.  The session was entitled Smaller Chapter 11s and Closely-Held Businesses – (Commercial).  The topic evoked a spirited discussion of the merits and drawbacks the small business debtor designation.

small-business

As part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, the United States Bankruptcy Code, the concepts of a small business debtor and a small business case were introduced.  The designation of “small business debtor” carriers additional reporting requirements not present in a typical chapter 11 bankruptcy case.  In many jurisdictions, including the United States Bankruptcy Court for the Western District of Pennsylvania, a special form disclosure statement must be used that plainly sets out projected revenue and expenses and other important financial data.

Perhaps most critically, the period during which the debtor has an exclusive right to file a plan is slightly longer than that permitted to debtors in chapter 11 bankruptcy cases that are not small business cases.  However, in order to have that deadline extended, the debtors’ lawyers must meet very strict timing and pleading requirements.  The consequence for failing to meet the deadlines for the filing of a plan and disclosure statement or for confirming a chapter 11 plan are severe and often deprive the debtor of an opportunity to reorganize.

Bankruptcy is complex and small business cases can add a new layer of complexity.  Small business owners who want the best chance to keep their company operating should have a comprehensive discussion with an experienced bankruptcy lawyer.

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Bankruptcy and the Automatic Stay

The Automatic Stay – What it is and How it Can Help You Protect Your Assets

bankruptcy staySection 362 of the Bankruptcy Code provides one of the most important protections extended to debtors in bankruptcy cases. With certain exceptions, the automatic stay applies the moment a bankruptcy case is filed and prevents the commencement or continuation of adverse litigation or collection activity. For individuals attempting to stave off a scheduled sheriff’s sale of their home or avoid the repossession of a vehicle, the automatic stay is federal law strictly prohibiting foreclosures and repossessions in most instances.

Tell your bankruptcy attorney of any existing or potential lawsuits against you and all possible adverse creditor actions. Generally, it is advisable for your lawyer to immediately give notice of the bankruptcy filing to such creditors to advise them that your assets are shielded by the automatic stay.

Creditors who knowingly violate the automatic stay are subject to mandatory sanctions for your actual damages arising from the violation. Additionally, courts may award punitive damages and attorneys’ fees for such willful violations. In the event of a stay violation, your bankruptcy attorney can best advise you on how to respond.

Creditors wishing to protect their interests may file certain motions before the bankruptcy court. Commonly, creditors file motions for relief from the automatic stay so that they can continue their collection efforts. Your lawyer can discuss your goals with you and help you decide whether to defend a motion for relief from stay. Additionally, certain secured creditors may move for adequate protection payments and demand that debtors provide evidence of insurance. When those kinds of motions arise, your bankruptcy professionals will be available to help you respond.

The automatic stay provides debtors in bankruptcy cases breathing room and puts a halt to chaotic creditor collection efforts. That stay may enable debtors to confirm a plan of reorganization, cure outstanding payments or provide for an orderly turnover of an asset. To assess your goals and map a path toward a fresh start and financial freedom, contact us today for a free initial consultation.

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Saving Your Home With Chapter 13 Bankruptcy

Chapter 13 bankruptcy puts a stop to foreclosureConsumer 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.

mortgage foreclosure solutionsBankruptcy | 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

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