A proof of claim is filed by a creditor after a Chapter 13 bankruptcy case is filed.  Its essentially the way for a creditor to raise their hand and say, you owe me money, please pay me my share.

Most of the time, the creditor has a legitimate proof of claim and your plan must be adjusted accordingly (more on that in another post), but occasionally a creditor will file a proof of claim that defies logic.

I have a current case where several bogus proofs of claim have been filed.

The most egregious claim filed was by a debt buyer (more on that in another post).  This company probably purchased a portfolio of debt accounts for a penny on the dollar, and if this claim was any indication of the quality of the accounts, probably less.

This creditor filed a proof of claim for $8800 on a debt that was charged off in 1996.  Just to give you some context, in 1996, President Clinton hadn’t started his second term yet, The Spice Girls had the number one single on the radio (which was released primarily on cassette tapes I might add), gasoline cost 73 cents a gallon and the New York Yankees were world series champions (some things just don’t change).

This creditor did not provide any supporting documents either.  It is likely that this creditor saw that my client was filing a 100% plan and they were just throwing it up against the wall and seeing if it stuck.

Unfortunately for the creditor, the wall they hit was me.  The first thing I do in this situation is contact the creditor who has filed the bogus or deficient (a nice way of saying bogus) claim and ask them for supporting documents.  If they don’t have it, I request that they withdraw the claim.

This particular creditor only had a voice mail box, so I left a message that they would provide supporting documents or I would file an objection to their claim.

Well I didn’t hear back and I filed an objection to their claim.  Surprise, surprise, the creditor withdrew their claim rather than fight in court.

That is what you want.  Anyone can fill out bankruptcy documents, but you want a lawyer who isn’t going to roll over and just let a creditor steal from you, which is what this creditor wanted to do.

I saved my client $8800, or almost $150 per month in her Chapter 13 plan.  That is $150 that can go to pay for clothes for her daughter, gas for her car, or even a night out.  Most importantly its $150 that she isn’t paying to a thief every month.

You don’t just want to hire a paper pusher, you want to hire a fighter.  You want to higher a lawyer that gets his kicks from pushing back at debt collectors when they push you.  You don’t just want someone in your corner, you want someone who is going to get in the ring and flatten the creditor that is trying to do you wrong.

If you are in danger of losing your home and don’t want to go it alone, call me at 484-661-2891 to set up a free, no obligation consultation.

Generally speaking your trustee payment will be due 30 days from the date of filing.  If you file your bankruptcy on September 2, your first payment to the trustee will be due by October 2.  In the Eastern District of Pennsylvania, payments are sent to a company called Ramapo, which is in Memphis, Tennessee, so it’s best to send your payment out approximately 10 days prior to the due date if possible.  Also, make sure your payments in certified funds, either certified check or money order or the payment will be sent back to you.

Your mortgage is a little different.  Most mortgages are due on the first of the month, which is why when I strategize about when to file, generally I suggest filing on the second of the month.  Filing on the second of the month gives you a full 30 days until your first mortgage payment after filing bankruptcy is due.

If your payment is due on the 15th of the month and you file your bankruptcy in September 2, your next mortgage payment is due September 15.  It goes the same way with other secured creditors (car loans etc.) that you are paying outside the Chapter 13 plan, so if your car loan is due the 20th of the month, the first payment due after filing bankruptcy on September 2 will be September 20.

If you have fallen behind your mortgage want to save your home, calling me at 484-661-2891 or e-mail me at Jim@padebt911.com and we can set up your free, no obligation consultation.

In most cases, the first hearing on confirmation is continued, so it isn’t anything to worry about if you keep in touch with your attorney.

If you filed pro se (by yourself) and are having second thoughts (and you should) about going it alone, feel free to contact me at 484-661-2891 or email me at jim@padebt911.com and we can discuss your case for no charge.

Perhaps the proper question is who. In both Chapter 7 and Chapter 13 bankruptcy, the bankruptcy trustee represents your creditors in the bankruptcy court. It is a trustee’s job to look out for the interests of the creditors.

That doesn’t mean the bankruptcy trustee is your enemy, the bankruptcy trustee is your friend, kind of like the friend who tells you that you had too much to drink and you shouldn’t drive home.

With the number of cases currently in front of the bankruptcy court, it would take years before a bankruptcy case would be processed if it were the sole responsibility of a bankruptcy judge, and that is where the trustee comes into play.  The trustee is there at your 341 meeting.  The trustee reviews all proofs of claim in your bankruptcy case for errors.  The trustee reviews of bankruptcy documents for errors as well, and generally speaking if your bankruptcy attorney follows the trustees request, your bankruptcy case should sail through.

The trustees also truth detector.  When you order 341 meeting the trustee puts you under oath makes you swear that you’ll tell the truth, and they’re very good at detecting when you’re telling a lie.

Bottom line is this, tell the trustee the truth and do what the trustee asks, and you’ll much better chance of getting your case confirmed.

My response: “good answer!”

Until the bankruptcy case is actually closed, there is still a chance to rescue your case from dismissal.  There is a motion that I’ve had to use called the “Motion to reconsider dismissal.”

You don’t want to be here.  If your case has been dismissed, it is probably because you did not follow an explicit instruction by the bankruptcy court, such as failure to submit documents or make payments.

Most dismissals happen in Chapter 13 cases, and most of these dismissals are the result of not paying your Chapter 13 trustee payment.

If your case is dismissed, the automatic stay that protects you from debt collectors is lost immediately, however there are certain circumstances where the judge will withdraw his dismissal order.

So you’re probably wondering: “How do I get the judge to withdraw the dismissal order?”  You’re probably not going to like the answer. You or your attorney (hopefully by now you have an attorney, you really need one) will have to go in front of the judge who ordered the case dismissed and convince him or her that your situation has changed and you are unlikely to run into the problem that caused your case to be dismissed in the first place.  If there ever was a Hail Mary pass a bankruptcy law, the motion to reconsider dismissal is it.

I had a client who fell behind on their chapter 13 plan payment and I was not able to convince a Chapter 13 trustee that they should continue the case to another hearing.  The case was dismissed, and because of that I filed a motion to reconsider dismissal after speaking with my client and determining that they could in fact come up with the funds to catch up to chapter 13 plan payment by the date of the hearing.

I went before the judge with a certified check for the entire amount my client was past due on the Chapter 13 plan payment.  Furthermore, I explained to the judge with detailed spreadsheets why my client would not fall behind again and respectfully requested that the judge reconsider his dismissal and reinstate my client’s case.

The judge was convinced in the case was reinstated.

Two weeks later, I was in front of a different judge, used the same tactic, and didn’t get the same result.  My client’s case was dismissed, that was a final decision, and now my client was going to lose her house because they fell behind on their Chapter 13 plan payment.

The moral of story is this, do not depend on the motion to reconsider dismissal order to save your home, however, if your case has already been dismissed and your lawyer is telling you you’re done, ask him or her about a motion to reconsider dismissal, and if your lawyer can’t or does not want to do that, call me at 484-661-2891 or e-mail me jim@padebt911.com and we can discuss whether or not this Hail Mary pass is worth throwing.

note: I will have to consult with the attorney who filed your bankruptcy case prior to accepting your matter.

Getting a mortgage modification after a Chapter 13 case is filed is tricky enough, if the Chapter 13 plan authority been confirmed, it requires permission from the court to modify the mortgage and amend the Chapter 13 plan.  Getting this permission is not easy.

This company is based out of Texas, and I’m not going to give them any advertising whatsoever, but you’ll know them when you deal with them.  Their salespeople are very good at being salespeople and they pretend to be a law firm, but if you dig through their website they will say that they’re not a law firm and not providing legal advice.  That’s a good thing, although I wish they be more up front about it, because if they try to practice law in Pennsylvania without a license, they be violating the law.  In my estimation, they are least violating legal ethics and while they say they are not providing legal advice, I’m sure that the State Bar of Texas would take a dim view of this behavior.

If you are in a current chapter 13 plan and you want a mortgage modification, you need to speak to your attorney before signing any papers.  As an attorney, I can only do so much to get sure money refunded from the slimy companies like this company in Texas and for one of my client it cost them $1899.

This client is angry with me.  I refused to authorize his company to process the mortgage modification.  The company claims you don’t need to be an attorney to process a mortgage modification, and they may very well be correct, but they are presenting themselves as a law firm and they are unlicensed, which could mean that my authorization of their services could mean they were working under my license.  I don’t know a single lawyer who would agree to that.

I don’t think I’m going to get the clients money back.  My best guess is that this firm is to disappear at the first sign of a complaint and reappear as another entity with a similar website and a similar slimy strategy.

Many clients seem to think that a mortgage modification is easy to get after a Chapter 13 bankruptcy is filed, nothing is further from the truth.  In the movie Back to the Future, Marty McFly said the Doc Brown: “you just don’t walk into a store to buy plutonium!”  You just don’t call the bank and get a mortgage modification either!  It’s a complicated process, a process being made more complicated because banks don’t really want to give modifications but are being pressured by the government.  Mortgage modification is a process that an experienced attorney should handle especially within a chapter 13 case.

So before you consider sending a large amount of money to an out-of-state company who promises you the world, think about this: “Can I get the Chapter 13 trustee to prove this modification and an amended plan by myself?”  The reason you should ask that question is because if you go behind your attorneys back and do this, they are likely to find a way out of the case, and then you’ll be left with no representation.

For my angry client, they got a happy ending to their case.  All they need to do is catch up their chapter 13 plan and they will have a confirmed Chapter 13 bankruptcy case.  They don’t have to lose their home.

When you’re ready to stop playing games with the out-of-state mortgage modification companies, call me at 484-661-2891 or e-mail me at jim@padebt911.com to schedule your free, no obligation consultation.

I’m generally not known for being able to give coping tactics on financial trauma, but there is one thing I know for certain, knowledge is power and the more you understand about your financial situation, the less uneasy you will be about it.  If after this article you still find yourself in need of some more help (there is nothing wrong with that, everyone needs to talk to someone at one point or another), check out my friend James Valeri’s web-site Jim Valeri, Counselor for more ways to cope with debt stress.

The focus of this article will be aimed towards the employed person or the person who works for themselves. My best suggestion to the person who finds himself unemployed is to treat his or her job search is a full time job. It’s cliché, but it works, and I’ve never been unemployed more than six weeks when I made looking for a job a full-time job.

For whatever reason, people find themselves under financial burden, and while a lot of the times these injuries were self-inflicted, the point here is not to assign blame, but to find simple, no-nonsense solutions to our financial problems.

Knowledge is power, so the first thing that you need to know, is exactly how much money are you bringing home from your job. Most people know that, but there are some people who get direct deposit and it’s to the point where they don’t even know what they make, that’s a bad position to be in.

Once you know how much you bring in each pay period, I want you to look at your 2008 tax return. Did you get a large tax return this year? If you did, that wasn’t the government’s benevolence, that was paying you back for overpaying your taxes during calendar year 2008. I routinely see people in my office who have $5000 – $6000 tax returns. If you’re getting a $6000 tax return, you essentially want the government $500 per month interest free for a year. That’s your money, don’t lend it to someone for free, especially an organization that spends $900 on a toilet seat.

If you’re overpaying significantly in taxes and getting a large tax refund every year, go see your HR person and have your holdings adjusted so that you’re getting more of your money each month when the government is getting less. Sometimes that simple move will get someone out of financial dire straits on their own.

If you all $1500 on your Discover card, and you’re struggling to find a way to pay, you fixed your tax withholding, you’ll have more money to pay that debt off, and the sooner you pay that debt off the less likely you will be to fall even further behind on your Discover card.

The next suggestion I have is to make a list of everything you spend money on for a week. That might seem silly but I did that in January, and I learned that I spent $30 at Starbucks, $18 at Joey Vento’s Gino’s Cheesteak’s, $120 at Merchant’s Square Mall, and almost $50 on various fast food (we have lots of health food in Philly). That was almost $200 a week on crap.

Rather than spend $30 at Starbucks, I bought an iced tea brewer for $25.  My iced tea costs around six dollars per month and it’s much healthier too.  I’m not going to say that I completely kicked the Starbucks habit, but it’s not a once a day thing anymore. I didn’t give up Gino’s completely either, but it’s become a once a month treat rather than a three times a week deal, and I didn’t give up fast food totally either, but the sandwiches I make are just about as good as what McDonald’s can come up with and for a fraction of the price.

I confess that the $120 I spent At Merchant Square Mall was just crap, I haven’t completely kicked that habit either, but definitely more aware of when I spend money at that place and now have the good sense not to go in just to say hello.

I’ve been able to lower the amount of money spent on crap per week from $200 to around $50, and the $150 savings per week is going towards paying my car off that much faster, and when this is paid off I’m going to knock out another car loan, I have a strategy for that as well, but that’ll be a subject of another post on another day.

The bottom line is most people would come see me don’t really need bankruptcy, they needed their financial house in order, the best way to do this is to figure out how much you make, how much you spend, and prioritize to determine whether you really do need the help of a bankruptcy lawyer were just a little bit of self control, because I assure you if you do not take control of your financial situation you will need my help and it will be sooner rather than later.

If you need help coping with your debt struggles and you don’t know where to turn to, please check out Jim Valeri’s site Jim Valeri, Counselor, and then when you are ready to get on the road to financial recovery, email me at jim@padebt911.com or call me at 484-661-2891 to schedule your free, no-obligation consultation.

The first thing that you need to know about magistrates is that they don’t have to be attorneys, but often they are.

The second thing you need to know about magistrates is that the credit card companies representative is probably just as nervous as you are, because these courts are unpredictable, a little bit like the Wild West.

What makes these courts so unpredictable are the judges.  Frankly, the magistrate system in Pennsylvania is broken because the wide variety of cases that these judges have to hear it sure is that no magistrate is likely to be an expert on any given field.  This is not the bankruptcy court where a bankruptcy judge will be an expert in the field because all they do is bankruptcy.

The best way to defend a credit card case is to make sure you don’t go in front of the magistrate.  Don’t let your debt problems get that far.

I’ve seen instances where an unsecured creditor has gone in front of a magistrate, gotten a judgment, got a lien on the debtor’s home, and made it difficult to get a mortgage modification and frustrate the bankruptcy case as well.

This is ridiculous.  Discover card should not be able to make itself a secured creditor simply by getting a judgment, and as a consumer it’s your responsibility to make sure that it doesn’t happen.

So I’ve been summoned to the magistrate, how do I avoid actually going to the hearing?  You could pay your debt, but if you could pay your debt you probably wouldn’t have made your creditor chase you for a year or more.  So my suggestion is if you are unable to immediately file bankruptcy protection is to discuss a settlement with that credit card company.

Once a case has been filed, the creditor is not likely to be as generous as they were prior to the filing of the case, because they have expended money in bringing the case and they are going to want to be reimbursed for that.  Generally speaking, creditors are excepting 80% percent of the balance or $200 per month on the full balance until the debt is paid in full.

It may seem sneaky or even dishonest, but I would find out from the creditor how long they would wait to except the first payment. Alternatively, you can tell the creditor that you’re planning to seek bankruptcy protection, and therefore they are unlikely to receive any money.  At least one creditor, Capital One, it has been known to cancel hearings based on that alone because they don’t want to pay the attorney who will have to appear for them when they are not likely to recover anything.

I’ve told you before him to tell you again, credit card companies have lawyers an army of working on their behalf, you really should get one too.  Chances are you don’t have just one credit card, but several credit cards in this situation, and its only time before they all come knocking.

If you’re ready to fight back against the credit card companies underhanded tactics, call me at 484-661-2891 or e-mail me at jim@padebt911.com to schedule your free, no obligation, consultation.

It seems like it should be an easy question, however because of the exemeptions in Chapter 13 bankruptcy, it is important to have an accurate valuation of your home and be able to justify it.  This is also where preparation can prevent disaster.

I have a client who refused to prepare for the 341 meeting of creditors.  Because they refused this 15-20 minute preparation phone call with me, my client may well lose his home because he gave the wrong answer to the property valuation question.  It stinks, because the property valuation question is a subjective question, and therefore there is no correct answer.

The trustee asked “If you put your house on the market today, what could you sell it for?”

I took a Zillow valuation of the property and valued it at $123,000.  I used another online valuation of the property, and it was valued at $127,000.  I even pulled comparable sales of property and they were in the $100,000 to $120,000 range.

So how did my client answer the trustee when asked what the home could sell for?  $170,000!

I’m sorry, even if a row house in Easton is built like the Taj Mahal, it isn’t selling for $170,000 in this market.

This could have been prevented if the client had bothered to respond to my phone calls or my letters.  After filing this client was unable to be reached.  He refused to take my calls.  When I finally got him on the phone, he refused to prepare for the 341 meeting.

His answer to me was “Well I’ll tell the truth.”  Telling the truth is good, knowing the truth is better, and the reality is that every homeowner would like to believe that their house is worth more than it actually is.

Because my client gabe the trustee this answer, the trustee is now working with $170,000 as the value of the house, and since he only owes $90,000 on it, he has $60,000 in equity (less the exemptions) that he needs to pay to the trustee.  That translates to about a $1300 per month chapter 13 payment when his payment should not really be more than $400 per month.

I believe that this chapter 13 plan will fail, and if it does he will be the first 2009 client I have had not be able to work with a Chapter 13 plan, and that is because we are now forced to work outside the parameters that  I filed it in.  The Chapter 13 plan was based on the property value of $120,000, which was a valuation I took before filing.  I used the full real estate exemption and the wild card exemption and rather than $60,000 in equity that needed to be paid to the trustee, the plan called for $4,000 in equity.

The bottom line is this, my client had every opportunity to prepare for the 341 meeting and simply chose not to.  When your attorney calls and wants to prepare you for a hearing, the love of all that is good please take their call and spend the 30 or 45 minutes necessary to prepare for it, if not it might cost you your home.

To fix this, my client is probably going to have to pursue mortgage modification, which in his case may not be so bad, but once you start down the Chapter 13 Bankruptcy road, it is in your best interest to finish.  The wrong answer at the 341 meeting may indeed cost my client his home, and the only person responsible for that is him.

If you’re having debt troubles or behind on your mortgage and you don’t want to cooperate with your attorney, please don’t call me, there are plenty of other people who want and need my help and are going to cooperate with what we need to do.  However if you’re part of the 99% of people who will listen to their bankruptcy attorney, and you’re ready to find your way out of the debt maze, call me at 484-661-2891 or e-mail me at jim@padebt911.com for your free, no obligation consultation.

It was doomed to happen.  In 2005, houses routinely fetched $250,000 to $300,000 yet the median salary in the Lehigh Valley was around $36,000.  Given the miserable performance of this economy, it’s unlikely that the average salary has gone up much since then.

The housing boom here was out of control, no doubt about it.  A lot of people were relocating from New York City and its suburbs to the Lehigh Valley for its lower taxes and lower cost of living, but because these folks who were used to paying $600,000 or more for a house didn’t think twice about paying $300,000 for a house that just 10 years ago might have gone for $130,000.

To make a long story short, the New York contingent artificially inflated the sale price of homes.  The New Yorkers are not totally to blame for this however, interest rates were kept artificially low by the Bush administration and borrowing money was never cheaper.  Another factor that went into this was the rampant fraud and the fact that you could have zero proof of income, no down payment, and qualify for one of these variable rate mortgages.  If Bernie Madoff had come up with this, they would’ve given him the chair.

So that brings us to today.  The same houses that were selling for $300,000 are now down in the $180,000 range, and I think they’re probably still too high.

A client came to my office on Friday.  He is a single man with a three bedroom 2 1/2 bathroom house in Allentown.  He hadn’t made a mortgage payment in a year, but now he was back to work in able to make his payments again, kind of.

My clients mortgage payment was $1105 per month.  He had a second mortgage of $242 per month.  His weekly take-home pay was somewhere in the neighborhood of $500.  If you’ve done the math you can probably see where this is going.

To make a Chapter 13 plan work for my client, he would have needed to pay a minimum of $300 per month and probably more to the Chapter 13 trustee.  With take home pay of $2166, my client would have expended close to $1900 per month just to stay in his home.

Clearly Chapter 13 bankruptcy wasn’t going to work for this man, however he had a 401(k) with about $100,00o in it.  He asked me if he should take a withdrawal from it to pay the past the past due on his house to stay in his home.  Looking at a situation, I had to tell him no.

Here’s why, he was going to dip into his retirement, something the Chapter 13 trustee cannot touch and very few creditors can go after, to save a house that he owed $30,000 more on than it was worth, and moreover, a home that he really did not need.

What was a bachelor doing a three bedroom two and half bathroom house?  He had never been married, his girlfriend lives in another apartment, so really he has a house way too large for his needs.   Now if he were financially able to keep the home, I wouldn’t care, because generally speaking real estate is one of the best investments out there, especially now, but this man was going to struggle to pay his mortgage even after taking a loan out of his retirement.

The bottom line is this, I could have taken the man’s money and filed a Chapter 13 bankruptcy for him, and it might have even worked. Chapter 13 bankruptcy is not for everybody, neither is mortgage modification, you may feel bad or a responsible for letting your house be foreclosed on, but the banks were just as irresponsible in their lending.  The banks went to the government and got a bailout.  No one asked your opinion when they took your tax dollars to bail these people out, nor did they offer you one (and its not coming either).

Sometimes it’s best to let the banks foreclose on the property, I know it hurts, but rather than spend $1400 per month on a home too large for him, my client is going to find an apartment in the $600-$700 range which will work for his budget and will allow him to regroup financially.

Once a foreclosure is over and my client has resettled, I advised him it was in his best interest to file Chapter 7 bankruptcy.  My client racked up nearly $30,000 in credit card debt trying to save his home. If he made the minimum payments, it would take in 35 years or more to pay his credit cards off.  Furthermore, some of the credit cards had been charged off and sent to collection and some of these agencies have become sue-happy lately.

Again chapter 7 bankruptcy is considered by some to be irresponsible, but the reality is these banks were irresponsible lending money to people who couldn’t possibly pay it back.  We don’t have debtor’s prison in the United States for reason, don’t allow yourself to be put in a debtor’s prison without bars.

Hopefully my client will take the next logical step and follow through filing Chapter 7 bankruptcy as we discussed at the meeting.  If you are unsure about your situation and want to know whether or not it makes sense to even just try to stay in your house, call 484-661-2891 for your free no obligation consultation.  You can also e-mail me at Jim@padebt911.com.  All contacts are kept strictly confidential.