Is filing for bankruptcy bad?

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Bankruptcy sounds like a bad word, but it can be the best thing for you if you can’t pay your bills. Many people wrongly believe that bankruptcy means you lose everything. In fact, bankruptcy usually helps you keep your property and gives you an opportunity to start over.

 

Many people wonder whether bankruptcy will hurt their credit score. In many cases, bankruptcy actually helps increase a credit score. If you file for bankruptcy, creditors will see that you are trying to remedy your problems rather than racking up late payments, lawsuits, and other negative marks. With bankruptcy, you can start building your credit again.

 

Because bankruptcy can wipe out credit card debt, personal loans, medical bills, past due rent, and past due utility bills, you can keep from dipping into important savings like retirement. With bankruptcy, you can start building your savings again. Bankruptcy is a word that sounds scary, but what bankruptcy can actually do for you is anything but.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

 

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What is the difference between Chapter 7 and Chapter 13?

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Chapter 7 is a liquidation bankruptcy. You don’t pay your debts back, but you may have to give up certain property in return. To qualify for a Chapter 7 bankruptcy, you have to meet certain income requirements. If you make too much money, or if you want to keep your property, you can file a Chapter 13 bankruptcy.

Chapter 13 is a reorganization bankruptcy. Under a Chapter 13 bankruptcy, a plan is filed with the court describing how you will repay your creditors. Under your payment plan, you will make monthly payments to the trustee for three to five years. The benefit of filing a Chapter 13 is that you get to keep your property, whereas under Chapter 7 you cannot catch up on missed payments to avoid repossession or foreclosure. Certain debts cannot be discharged in bankruptcy such as alimony, back child support, and certain tax debts. In those cases, repayment plans will be set up with the trustee to help get you caught up.

Whether you file a Chapter 7 or 13 bankruptcy depends on your objective. Chapter 7 usually means you don’t have to pay your debts, but you might not get to keep your property. Chapter 13 lets you keep your property, but you will have to repay your debts.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

 

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Cibik & Cataldo
1500 Walnut Street Suite 900
Philadelphia, PA 19102
(215) 735-1060
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What Happens When I File a Bankruptcy?

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If you are about to file bankruptcy, your finances are probably disorganized. Your creditors are calling you, charging you crazy fees, and suing you, among other things. Once you file for bankruptcy, your finances become more organized because the automatic stay goes into effect, which means that your creditors can no longer take collection activity against you without the bankruptcy court’s approval.
The court will appoint a trustee who is responsible for paying your creditors. A month or two after your case is filed, you and your attorney will appear before the trustee for a hearing usually referred to as a meeting of creditors. Usually, the trustee asks routine questions about your finances. But as the name suggests, creditors have a right to come to the meeting and express any concerns they may have.
If you are filing a chapter 13 bankruptcy, your attorney will put together a repayment plan and file it with the court. The plans usually last for either three or five years. During that time, you will pay the trustee a fixed amount each month, and the trustee will pay your creditors the money you owe them. You must pay priority and secured debts in full, but you usually only pay unsecured debts as much as your monthly income allows. A secured debt is a mortgage, car loan, or other debt where the creditor loaned you money for something that can be taken away. Most other debts, like credit cards and medical bills, are unsecured. Priority debts include taxes, utility bills, and attorney fees, which, like secured debts, must be paid in full.
If you pay your bankruptcy plan payment on time each month, you can live your life without worrying which shoe will drop next. At the end of the three or five year bankruptcy period, your debts are discharged, and you are as good as new.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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In a Chapter 13 Bankruptcy: Can I Pay One Debt Better Than Others?

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Everyone with debts has at least one bill they’d like to pay, even if they can’t pay them all.  So, if you are already filing Chapter 13 bankruptcy and repaying some debt, why not treat some better than others?

 

Sometimes that is allowed and sometimes not.  It’s a complicated issue because, at the heart of the Chapter 13 plan, there is a pool of money – the payments you make – which has to be divided among creditors.  If one is paid more, others get less typically.  So, favoring one means discriminating against others.

 

The law requires some discrimination.  For example, if you aren’t paying everyone in full, then you typically have to provide for special “priority” claims to be paid in full.  These are things the government has a special interest in – paying the trustee, child support, recent taxes and so on.

 

In other cases, like your home and car, the law often allows payment of these “secured” debts in preferential ways over your other debt because you need those assets to keep going (and putting the money into the pot each month!).

 

But what if the debt is one you can’t wipe out at the end of the typical case, like student loans?  Can you pay those in full and “short change” the other debts you can wipe out?  Sadly, there are only limited ways to do that because it gives you a “head start” not a “fresh start” at the end of your case, according to some.

 

In October 2012, a couple argued they should be able to pay non-priority taxes they could not wipe out in full not because it would help them out…but because the tax authorities had done nothing wrong and deserved to be paid. The 8th Circuit’s bankruptcy appellate panel did not buy that argument either. See, In re Copeland, #12-064 (8th.BAP 11/12/12).

 

Thus, arguing that your sister’s loan to you deserves special treatment because she’s been good to you probably won’t fly either. If paying the debt with special treatment is necessary to keep your case afloat or otherwise earning income, then it might be better received by the court. Some judges have allowed restitution and some business-related debts to be paid preferentially, recognizing that going to jail or having to close your business down is counterproductive to getting anyone paid.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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Why did Philadelphia Energy Solutions File for Bankruptcy?

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Philadelphia Energy Solutions (PES) filed for Chapter 11 bankruptcy protection, its second such filing in less than two years, after a fire  prompted it to close the largest refinery on the U.S. East Coast. Following the June 21 explosions and blaze, PES started shutting down the 335,000 barrel-per-day Philadelphia plant without a planned restart. Some 1,000 workers are being laid off.

 

The company’s lenders agreed to provide up to $100 million in new financing to PES to usher it through the bankruptcy. The agreement allows PES to safely wind down its refining operations and, with the support of its insurers and stakeholders, hopes to position the company for a successful Chapter 11 Bankruptcy reorganization, the rebuilding of its damaged infrastructure, and a restart of its refining operations.

 

The success of the reorganization plan is critical to energy supply and security for the region, the Commonwealth of Pennsylvania and the City of Philadelphia,

 

PES could receive payouts of $1.25 billion in insurance claims connected to the fire and business closure. The potential insurance payouts include $1 billion for property damage and $250 million for loss of business.

 

The insurance payouts were expected to be used as collateral for the new Chapter 11 Bankruptcy financing, PES also asked the Bankruptcy Court to allow it to continue making insurance payments. Its premiums cost about $1.4 million each month on 39 policies, according to filings with the U.S. Bankruptcy Court.

 

PES has multiple owners, including investment bank Credit Suisse and investment firm Bardin Hill, and has both assets and liabilities between $1 billion and $10 billion Bankruptcy Court filings show.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia bankruptcy law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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What Is the Great Computer Myth on Credit Reporting?

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We need to know all the debts you owe or might possibly owe in order to put a Bankruptcy case together. One mistake debtors often make as we get into deeper debt is to stop looking at the bills and notices. It’s stressful enough to have debt collectors calling, so we stop reading or keeping the bills and notices just to stay sane. If you can’t pay it, even opening the envelope hurts a bit.

 

But if you don’t read and keep the notices and bills, it is much harder for someone else to help you. Folks come in to see me and have no real idea who they owe now, how much, or what for. Often folks think it’s OK because there’s a record somewhere of everything they owe, like there is some Great Computer that has all this information in it, and the NSA is not letting bankruptcy lawyers get at it!

 

There are services that allow us to access your credit reports, with your consent.  And you can have free copies of your credit report each year too.  But your credit report is not going to help us very much in building your case for you.

 

However, some lenders do not report to credit bureaus. Some debt may be too old to appear on your report – but still be a debt you owe.  Some is just not the type of thing that pops up on credit reports – like a debt for damage to a neighbor’s car or money you owe a friend. Mistakes on credit reports happen a lot more than they want to admit.  A credit report will only tell us what some creditors, possibly yours, claim you owe them –not every creditor or potential creditor you could owe.

 

If you don’t list some of your debt in your case even by accident, it can be harmful to your financial health. In the simplest cases, it just means you have to spend more in attorney fees and court filing fees to fix the paperwork filed in your case.  But in extreme cases – particularly cases where some money is paid into the bankruptcy trustee’s hands from your assets or your payment plan – then the unlisted debts may not be wiped out at the end of a successful case

 

So even if it is physically painful to keep the bills and threatening notices from creditors, do it anyway. Don’t put your faith in the Great Mythic Computer to save you

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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Why File Chapter 7 Business Bankruptcy?

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Corporations and LLC’s don’t get a discharge in a Chapter 7 bankruptcy, so what’s the point of filing? Ensuring that business assets go to pay payroll, benefits, and taxes is a compelling reason.

 

Chapter 7 is a liquidation proceeding; the trustee appointed by the court will gather up and sell the corporation’s assets and pay creditors in the order of their priority under the Bankruptcy Code.

 

It is the notion of priority, then, that may make it advantageous for a corporation going out of business to file bankruptcy. The Code’s priority scheme provides that claims with a higher priority are paid in full before claims with a lower priority get anything.

 

The business owner probably has two personal concerns about what happens to the business assets: they wants to receive payment in their role as employee, and to see that taxes for which the individual might be liable personally get paid from corporate assets to the extent possible.

 

The owner’s concerns dovetail nicely with the priority scheme: unpaid wages incurred in the 180 days before filing or cessation of the business, whichever came first, have a priority for payment. Claims are capped at $10,000 per employee.

 

Taxes owed to governmental agencies have a high priority for payment in bankruptcy. While the shareholder probably isn’t liable for the corporation’s income tax or property tax, the individual may well be liable for any unpaid trust fund taxes (employment taxes) or for unpaid sales tax. The shareholder has a real interest in payment of these taxes before payment of run of the mill business debts.

 

So, one very good reason for a business corporation to file a Chapter 7 bankruptcy is to see that priority claims are paid, instead of the claim of a creditor without a priority who files a collection action.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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Does it Make a Difference if I File Bankruptcy Before the End of the Month?

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If your income is above the median income for your household size in your state, you must complete a “means test” when you file your bankruptcy petition. To determine whether you are above or below the median income, your gross income for the six-month period prior to the month you file bankruptcy is considered.

 

So, if you would file, October 31, the six-month period under examination is April through September. If you file the next day, November 1, the six-month period excludes April but adds October. If you get the exact same paycheck each payday, this won’t make a difference. But what if you got a lump sum bonus or a retroactive pay raise in one of your October paychecks? In that case, you could be under the median today, but well over it tomorrow.

 

Some income may not need to be included in determining median income. Social Security income, for example is excluded.

 

Just because you are over the median income, it doesn’t necessarily mean that you can’t file a Chapter 7. For example, if more than 50% of your debt is business related and not consumer debt, you may be able to avoid the “means test” and qualify for Chapter 7 Bankruptcy. Therefore, be sure to work with an experienced bankruptcy lawyer to see what your best options are.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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What Are The Risks of Co-Signing a Loan?

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Co-signing a loan is a dangerous thing. Too many people end up in bankruptcy due to debts they just co-signed for, so here are a few points worth considering before co-signing for a friend or family member.

1. There is a reason they need a co-signor. A professional lender does not think they will pay the money back. An objective professional (or underwriting standards) arrived at this judgment. Why do you think you know differently?

2. If they do not pay or miss payments, it will affect your credit.

3. The fact that the debt exists, and you are liable for it, in itself, will affect your credit and will limit the amount of other debt you can contract due to your debt/income ratio.

4. In most states, the creditor doesn’t have to chase the primary borrower when they don’t pay. They will usually just pursue the co-signor in court, getting a judgment and attaching the co-signor’s property and wages. This is a real shocker for most people, and I’ve had many, many conversations with people in some stage of disbelief that they, and not the person who they co-signed for, is getting chased for the debt. However, the truth is that the co-signor is usually better off financially than the primary obligor and, consequently, is a more attractive target for a creditor.

5. Unless you agree otherwise with the lender, you may not even know if the primary obligor misses payments. They may be afraid to tell you while you are accruing mounting interest and late fees.

Co-signing a loan is serious business, and you should think about it as taking on the debt itself, rather than just helping someone out because a creditor is being unreasonable. Once you co-sign a loan it is your debt, and you should ask whether you can afford it and really want to take on the responsibility.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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Can Bankruptcy Be A New Day?

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I’ll admit that most of my clients never wanted to come see me.  Most of my clients are embarrassed by the fact that they even must ask about filing bankruptcy.  Struggling with debt is hard and it can literally suck the life right out of you.  For most, it seems like the end of the world.

 

Generally, when I speak with folks, the stories revolve around the same themes.  They have tried their best to manage their finances but through one thing or another, they just can no longer juggle the debts.  They are constantly badgered by telephone calls demanding payment immediately.  They are tired of going to the mailbox to get another batch of letters with red print shouting “pay now!”  They are tired of a sheriff’s deputy showing up at their home to serve yet another lawsuit against them.

 

Yet, once a bankruptcy case is filed, these problems go away.  As Jill Michaux explained, the crushing weight of debt is lifted off your back.  Because of the automatic stay, you will no longer receive collection calls or visits from the sheriff.  But, once your case is over and your debts discharged, you will find a new financial future.  To be sure, as far as credit goes, it may be initially more difficult, but credit is available.

 

The simple fact is that bankruptcy is not the end of the world.  It is a new beginning-a fresh start.  Just as the night is darkest before the sunrise, so it is with the bankruptcy world.  Once you decide that you are tired of laboring against insurmountable debt and take the action to rid yourself of that debt, the sun starts to peek through the horizon.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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