I do this because Lehigh Valley consumers suffer from a lack of valid information on options to resolve their debt problems.  I do this because the radio stations in Allentown, Bethlehem, Easton and Emmaus have advertisements running non-stop offering debt settlement and mortgage modification.

I do this because even two years after the FTC made mortgage modification by anyone other than an attorney illegal, I still have clients come to me after being ripped off by these shysters.

Today’s post is going to be different.  My New Year’s resolution was to let my reader get to know Jim the person, not just Jim the lawyer.  When I’m not wearing my lawyer suit, I’m a lot of things.  I’m a member of Calvary Baptist Church in Bethlehem, PA.  I’m a registered Democrat with a serious Libertarian bent.  I’m a fan of the New York Islanders and I probably have owned every one of PFR’s albums, including Goldie’s Last Day on cassette (for the under 25 crowd, the cassette played music on a… nevermind).

Above all that, I am a believer in Jesus Christ as my savior and that the Bible gives us our only true road map on how to live our lives.  While that may not be politically correct, I’m not worried about that because my savior wasn’t politically correct either.  I am the father of two little girls, one is almost 7 and the other just turned 5.  The Bible is clear in Proverbs 22:6 “Train a child in the way he should go, and when he is old he will not turn from it.”  Even if you are not a believer in my faith, this is still a logical statement about child rearing.

That’s why I need the C.E.O. of Go Daddy, Bob Parsons, to understand why I can no longer be a customer.

I watched the Super Bowl on Sunday.  I was thrilled to see fellow Ole Miss alum, Eli Manning, lead the Giants to another world title.  What I wasn’t happy with was the risque nature of some of the commercials, particularly Go Daddy’s commercials (no I will not dignify it with a link).

Mr. Parsons cannot reasonably expect that children were not going to be watching this game, and while the entirety of television content should not be determined on whether or not children could be watching, he made his decision to go over the line and I made the decision to no longer be his customer.

This is not a call to action, I’m not trying to start a boycott. This is a lesson in fatherhood.  I was a customer of Godaddy, the server transfer should be completed soon and then I will have no relationship with them at all.

I am raising my daughters to be first God-fearing and Bible believing, and secondly to believe in themselves and that their worth is not connected to their looks.  I simply will not support an organization that chooses to send an entirely opposite message.

The commercial you ran during the Super Bowl, Mr. Parsons, is an affront to any father raising daughters the way I am.  For an accomplished woman like NASCAR star Danica Patrick to be put on display as a sex object tells them that regardless of whatever they accomplish they will only be considered valuable if they parade on stage in next to no clothing.  This is a message that I and fathers of daughters around the United States summarily reject.

So Mr. Parsons, it gives me great regret to tell you that you and your company are fired.

You see, as that great philosopher Simon Wilder in the movie “With Honors” (One of my top-ten movies of all time) said, “Our ‘founding parents’ were pompous, white, middle-aged farmers, but they were also great men. Because they knew one thing that all great men should know: that they didn’t know everything.  Sure, they’d make mistakes, but they made sure to leave a way to correct them.”

As a lawyer, I’ve made some mistakes, and more importantly, its time to correct them.

One thing I have let slip is the returning phone calls in 24 hours rule.  Now I know there are a lot of lawyers in this county that take weeks to return phone calls, but that has never been me, but I had a rule to return calls in 24 hours unless it was a weekend or a holiday and I know I dropped the ball on that this year.  To remedy this, I’ve got a simple solution.  I will return all my phone messages at the same time every day, that way I know it hasn’t been 24 hours.  My office number is 610-400-3093 just in case you need it.

Another thing I fell into last year is something that gets debtors in a lot of trouble, and that is procrastination.  Documents are filed with the bankruptcy court every day, yet it seems that issues are only resolved the day before they are due.  That is crap, and I am as guilty of that as anyone.  No more.  I will be logging into my ECF mail program each day and getting right on top of things.  Now I do have some matters that I am behind on, but in a matter of a month that will solve itself and I will never, ever, fall this far behind again.

Finally I have been guilty of being robotic at times.  Everything on this blog is about law, and that is all good information, but some of this blog should be about me and about the city of Emmaus that I call home.  Beginning with my next post, I’m going to let you a little more into my life and know a little more about me.  What movies I like, what kind of hobbies I do, as well as some of the great places in Emmaus that I suggest you check out.

So from today and on, the old lawyer who fell behind on his work and took too long to return calls is officially fired.  The new attorney Kutkowski is here, ready and able to help you get through your financial woes, and occasionally play movie critic and irate sports fan as well.

So what about you?  What are your resolutions this year?  Everyone wants to lose weight or get in shape.  We all probably ate too much over the holidays, but what about your finances?  Are you ready to get the weight of your credit card debt or other aggravations off your back?  Are you ready to start your ride off into the sunset and leave your debt woes behind you.  If you are, please call 610-400-3093 and set up your free consultation.  Debt freedom can be yours.

Fair warning, let the rant begin!

Recently I was driving and heard an advertisement enticing the consumer to go into debt to go on vacation.

The ad goes something like this.

Wife: “Oh, I can’t believe it.”

Husband: “Yeah”

Wife: “Is this our vacation?”

Husband: “No, it’s the honeymoon we never took.”

So far, so good, but then here is the catch…  Wait for it…

Husband: (Thinking) “Finally I get to fulfill the promise I made, thank you Ivy (Name Changed to protect the guilty) Financial.”  Then the radio announcer guy says “Take out a loan against your house for new furniture or that vacation you’ve always wanted to go on.”

I thought we learned our lesson in 2008!

At this point I started yelling at the radio.  I stopped myself before I drove off the road and because I had woken up my daughter (sorry Mellie) with my rant.  I let loose a torrent of frustration usually reserved for my hapless New York Mets.

Did we learn anything in 2008?  You finally have SOME equity in your home and you are going to borrow against it to go on vacation?  Seriously?

Banks exist to make a profit.  They are not sending you on vacation for nothing.  Every additional dollar you borrow against your home is an additional dollar you will have to pay back later.  SO DON’T DO IT!!!

Lets pull this ad apart.  It said “take a loan against your house.”  A house is a thing, an object, something that is replaceable.  Your home is where your kids live!!! The bank is enticing you to borrow money against the place your kids live.

You can’t live in your vacation.

I can’t tell you how many people I see in my office that have awful second mortgages and can’t tell me where they spent the money.  I know where they spent the money, and so do the Ivy Financials of the world.

So what does this have to do with bankruptcy?  Very little actually.  Most lenders are being very careful about second mortgages these days.  They are being careful because with the value of real estate plummeting (it has dropped 35-40% and the biggest shoe hasn’t dropped yet) they have been subject to lien stripping even when they have tried to pull a dirty 80/20.  This means that a lot of second mortgage lenders are not getting paid on their loans.

Be assured that this time around, the second mortgages will be paid, every last penny, and if they are not, they are going to start foreclosure proceedings.

There is no free ride on the second mortgage these days.  I thought we learned our lesson in 2008.

Well the first step is to whine… well no, not really.  I’m not saying I didn’t let an expletive or two out after hearing that we lost, but I’m not not saying it either.

So after getting over the sting of losing a case that should have genuinely been won, what is the next step?

Well the next step is not to ignore it, and at least my client understood that.  In Pennsylvania, a magistrate’s decision is only final if the losing party does not decide to appeal the decision.  If the decision is appealed, the case is reviewed de novo (as if the first case never happened) at the Court of Common Pleas level, or as my client put it, “Big Boy Court.”

This is not to disparage the position of District Justice nor this particular judge’s decision (no matter how wrong it actually was), in my experience with District Justices, they have neither the time or capacity to understand every case that goes in front of them.

Once a District Justice has rendered his or her decision, the parties are notified in the mail of the result of that decision and are given thirty days to file an appeal.  The cost to file an appeal in Berks County is $215.50 (each county is different) and the appeal must be filed in 30 days.

The appeal is essentially a generic document that starts the process all over again, and because the hearing before the Magistrate is not a matter of record, your opposition is given twenty days to file their complaint or they could be subject to what is called a judgment non pros.  A judgment non pros basically says that you did not file your complaint so the Magistrate’s decision is overturned and you lost your case.

For the plaintiff all is not lost, unless the case is dismissed with prejudice, they can file the case again, but since they have already expended the money necessary to file the first case and have nothing to show for it, chances are they will go away.

So what should we do in this particular case.  Without giving information that would reveal my client’s identity (I would never violate privilege like that) here is the story.

My client, Steve (the name is changed to protect the innocent) is being sued by Discover (the name is not changed because we know Discover is a slimy company) for a credit card.  The balance they claim owed is $9500.  By all rights, they shouldn’t have even filed at the District Court level because the Magistrate is capped at $8000 in damages, however due to some sneaky maneuvering, Discover still managed to get a judgment for $9500.

Discover claims that Steve last paid this card in June 2010, but it is possible this card was taken out in his name by someone else, it is also possible that this is card from way in the past that his significant other (my father would have called it living in sin) had been using and paying.  Steve is one of those clients who can honestly say he doesn’t remember having an account.

We have what appears to be a potential statute of limitations case here.  The statute of limitations in Pennsylvania is four years on debt, but the statute starts at the date of last activity (payment).  You’re probably thinking, four years from 2010 gets you into 2013, why a statute of limitations issue.  The reason is that Discover says that the last payment was made in June 2010, it doesn’t mean they can prove it.  They had no canceled check, no payment confirmation, nothing but the integrity of the bank not to make a mistake or be deliberately underhanded.  Yeah me too, I’m not giving them the benefit of the doubt on this one.  Produce a canceled check or it didn’t happen.  Opposing counsel actually had the nerve to argue that these payments posting helped my client because it lowered his balance, I brought up the statute of limitation argument.

Opposing counsel also had the nerve to bring up the Fair Credit Reporting Act which requires a person to dispute something on their credit card within 60 days of receiving the statement, yet Discover did not have proof of mailing.

In any event, my strategy is going to be to file the appeal on day 29 to burn more of the statute of limitations.  If Discover loses the case, the statute of limitations will still be from the last legitimate payment date, furthermore by filing the appeal on day 29, there is a better chance that this appeal gets ignored and judgment non pros is entered.  By day 20, the winner at the magistrate level is usually pretty secure in their victory and may be counting their money in their head.  In my experience, a complaint in an appeal is more likely to be filed with a later appeal filing.

So in a few weeks, we will be filing our appeal and I am expecting Discover Card to put up a fight, but they’d better be better than they were Friday in Perkasie, because none of the crap they got away with in front of the magistrate is going to fly in Big Boy Court.

The ultimate solution to joblessness is getting a job, but while you are unemployed, there are some common sense things you can do to survive.  No, this isn’t going to be as much about bankruptcy as common sense, but sometimes when you are in the middle of the storm, common sense isn’t so common.  That’s OK, there will be a litany of people giving you advice, myself included, pick the advice that makes the best sense to you and discard the rest.  Don’t worry, I won’t hold a grudge if some of these tips don’t suit your fancy.

Tip #1, figure out your financial situation.  If you are newly laid off and collecting unemployment and you have some money saved in the bank, you may not be in a terrible situation at all.  Unemployment lasts a while these days, in some areas as long as 99 weeks, and while I would hope you’d find employment before that, at least there is that cushion.  If on the other hand you have nothing in the bank and you aren’t able to collect unemployment, you are definitely in some hotter water.  It is best to be armed with as much information as possible, and as painful as it may be to look at your account balances dwindle, you need to know where you stand.

Tip #2, coupons.  Coupons are very high on the list of awesomeness! Companies are giving you discounts on items you probably buy anyway, so clip away.  Our local newspaper the Morning Call advertises hundreds of dollars in savings every week.  I don’t know if that’s true or not, but I know a good deal when I see one and when I can routinely get $50 in savings on things I would buy anyway from a $1.25 Sunday newspaper, that’s a steal.

Tip #3, buying in bulk.  One of the best quotes from one of my favorite cult classic movies, Employee of the Month, is “Buying in bulk is our God-given right!”.  Well I didn’t see anything like that in a version of the Bible but even so its still a good idea if you can store food.  If you can’t and it rots, well you lose money, but if you can, it can be a Godsend, and I promise you I’ve gotten more mileage out of my Sam’s Club membership than what it cost.  Think about it.  If you spend $8 for 24 rolls of toilet paper, is that a better deal than $19 for 96 rolls of toilet paper?  No it isn’t, and since toilet paper doesn’t go bad, it makes perfect sense to buy this sort of thing in bulk.  As long as it can be stored safely and bought at a discount and it’s going to be used (bulk purchases of brussels sprouts are not a deal if they aren’t eaten), its worth it to buy more ahead of time.

Tip #4, The Best By Date on the Milk Carton was Created By Lawyers, the Sniff Test by God. God gave you a nose for a reason.  One of the big reasons for the olfactory sense is to know when we are about to eat something we shouldn’t.  While I’ve wondered who was the first person to look at a cow and think, “hmm, I bet that tastes great?”, the milk isn’t bad unless it smells bad.  You can’t always trust the best by date either.  As a teenager I poured some wonderfully sour milk into Cheerios and wow, you don’t forget that.  My wife will tell you that I will sniff the milk twice or three times, every time I pour my kids cereal.  Yeah, you don’t forget that.

Tip #5, a car burns gas faster with the air conditioner on.  It’s true.  I don’t know why it works like that but it does.  On days where it is 100 degrees out (like today), you probably need to have the air conditioner on (although I had a 1977 Chevy when I was in college and it didn’t have air conditioning and that was Missouri in the summer), but on a day where its in the high 70s to the low 80s, roll the window down, enjoy the fresh air.

Tip #6, when you have less money coming in, prioritize what you spend money on.  Power, water and food comes first.  Then transportation.  Don’t fall too far behind on your car loan, they will repossess it and then you will have to pay the whole balance to get the car back.  A mortgage you can fall further behind on, but don’t deliberately do it.  If you can’t afford your mortgage, you can usually stay in your house a year before it is foreclosed on in Pennsylvania.  Hopefully you will be back to work before then and can work something out with your bank, but if you can’t consider Chapter 13 bankruptcy, I know a lawyer who is pretty good at that.  Your credit cards are the last people who get paid.  They will hoot and holler and call you all sorts of nasty names, but if its between whether feeding your kid or having someone berate you on the phone, I choose feeding my kid every time.  Don’t let these jokers bully you, because if they do, they could find themselves being sued.  I stole one of my favorite lines from Dave Ramsey, “I’d sure like to own a collections company.”

Tip #7, cut the fat.  I’m not talking about your diet, however if money is scarce going on a diet might make things seem a little less oppressive.  I’m talking about the things we can’t live without that we probably can live without.  Cable TV is probably the first thing on my list.  Cable has become expensive, and frankly not worth it.  The cable/internet/phone deal costs almost $150 per month in my area, but you can get internet for $50 a month and Netflix for $8 per month.  Couple that with an antenna (used to be called rabbit ears) to get local programming and you will have almost everything you had anyway.  Do you really need an extra two food channels?  Is your life better because you get MSNBC or FOX News?  Do you really need a land line phone when everyone and their child has a cell phone?  No, you could cut your entertainment budget in a third and if you really need to see a TV show, most stations are streaming current TV shows on their web-site.

Tip #8, Never Surrender! Don’t give up.  When you get knocked down, get up and try again.  We’re Americans, it’s what we do.  The West would never have been won if the original settlers gave up the first time they encountered trouble.  If you want to live in a country that is going to coddle you from the day you are born until the day you die but you will never really get a chance to be successful, try France.  It may take a year, it may take longer to find a job.  You may never find another job.  When I got laid off , I start
ed this law practice because it was clear that the legal jobs that I was qualified to do were drying up and being sent overseas.  You may find something that you have always wanted to try but couldn’t because it would be too much of a pay decrease.  Now it won’t be.  One day, and maybe not to long from now, I’m going to try something new, something different.  For you, that day may be today, so go for it with all the gusto you have. But most of all don’t give up, don’t ever give up.

If you find yourself in a financial position that you can’t handle or you can’t get a handle on and you need to talk to a competent professional, call 610-400-3093 for a free consultation.  You don’t have to do this alone, and you may not even need legal advice, just friendly advice.  It would be my privilege to provide you with either.

Sadly, 50% of marriages end in divorce.  That means 1 out of every 2 marriages will end in failure.  So even though discussing divorce is as fun as rehashing the 1993 Mets season a game an inning at a time and seems to last as long as the last Jane Austin film I was forced to watch (the last thing I wanted to hear was this is the end of Act 1), it is important to know what a divorce decree can and cannot do regarding debt.

The most important thing to know is that a divorce decree cannot, on its own, change a contract.  If Jack and Diane had a credit card that they were jointly responsible for and when they divorced, Diane was to be responsible for paying that debt, Jack is still responsible for it contractually.  Divorce cannot change the terms of a contract with a non-related party! Think about it from a fairness perspective.  Suppose rather than Citibank lending Jack and Diane $20,000, it was their friend Fred.  Fred knew that Jack had a good job and Diane had always been good for the money, so he made a loan that made them both responsible.  Would it be fair to Fred if a divorce decree could cut his rights to collect that debt in half?  Of course not, and I dare say that banks would not make loans based on two incomes if a divorce decree could change their contractual rights.

So now Jack and Diane are divorced.  Jack has the kids and is moving on with his life.  Diane however is now realizing all that Jack contributed to her lifestyle and is hitting a cash crunch.  It happens, it doesn’t make you a bad person! Diane stops paying the Citibank bill.  It won’t take long before Jack, who has gotten his life back in order, starts getting collections calls from Citibank… unless Jack has changed his phone number, which is common in divorce.

Now Citibank doesn’t have good contact information from Jack and he doesn’t find out that Diane has stopped paying on her bill until a lawsuit is filed against him.

So you’re probably thinking, how do I avoid this?  One of the smartest things you can do is keep an eye on your credit report.  If you are a joint borrower, the card will appear on your credit report.  You will be able to see if the bill is being paid on time.  You should also keep a record of all accounts that your ex-spouse is supposed to be paying and check them on-line! Just about every credit card company has on-line access, it is more cost effective than having phone jockeys handling the phone calls or even an IVR giving electronic information.  By going on-line you can quickly see if your ex is doing what he/she is supposed to be doing.

Of course, Jack hasn’t done any of these things and now he is in pickle because he’s being sued for a debt he thought was gone because his divorce lawyer told him that he is no longer responsible for the debt.  Chances are if your ex isn’t paying one bill, they aren’t paying any of them! If you find yourself in this position, you need to speak to a competent professional who can help.  More than half of the people I see do not need bankruptcy, they just need to find a way out of the weeds.  If this is you, I’d be happy to help, call 610-400-3093 for a free consultation.  One think I tell my clients is Control the situation rather than have the situation control you!

As far as family law, I don’t do that, however if you are in the Lehigh Valley area and need a good family law attorney, I’d be happy to refer you to one.  Call 610-400-3093 for the referral.  Just remember that just because the divorce decree says you don’t have to pay it doesn’t mean you won’t eventually have to pay it.

One of the most common mortgages was an 80/20 mortgage.  You would be given a first mortgage which would cover 80 percent of the cost of the home and then a second mortgage that would cover the remaining 20 percent of the loan.  The 80% mortgage would be in put in first position and the 20% mortgage would be put in second position.  You had this second mortgage to avoid paying PMI payments each month.

You would put no money down, so essentially you went from renting to paying a mortgage without any pain in the pocket, in fact, a lot of these mortgage payments were less than what a person could rent for.

Very few thought about the chances of these homes going down in value (I did, but I make Murphy look like an optimist).  The idea was that the house would increase in value in a few years and there was no risk in there being a lack of equity in the home because real estate always went up.

There were a few who did think about the chance of property losing value and a few of them were mortgage lenders.  Some of these lenders made the 20% mortgage the mortgage in first position and this is why:

A secondary mortgage can be considered completely unsecured if the value of the property is less than that of the first mortgage.  For example, suppose a borrower has a first mortgage balance of $200,000 and a second mortgage balance of $40,000.  Now in our example, the house is worth $180,000.  The house is worth less than the balance of the first mortgage and that makes the second mortgage completely unsecured.

There is an option inside a Chapter 13 bankruptcy to have that second mortgage treated as unsecured.  In the Eastern District of Pennsylvania, where I practice, you need to have a motion to value the real property and then file an adversarial matter to have the mortgage treated as completely unsecured.

The only way to have the mortgage treated this way is if it were COMPLETELY unsecured.  That means if the property is worth $200,000.01, the second mortgage is not completely unsecured and you cannot treat any of it as unsecured.

What a few unscrupulous lenders did during the housing boom was to put the 20% mortgage in first position.  Now when the borrower finds themselves in financial straits and files Chapter 13 bankruptcy, the option to claim the second mortgage is completely unsecured is off the table because the documents were filed incorrectly, deliberately or not.  The 20% mortgage is considered the first mortgage and unless your property has really taken a dive in value, the 80% mortgage is not going to be completely unsecured.

This is an area that is ripe for another class-action lawsuit, even if you are not planning to file Chapter 13 bankruptcy, because bank malfeasance has taken this option off the table.  If you find yourself struggling to keep up with your debts, please call 610-400-3093 or email me at jim@padebt911.com for a free consultation or a referral to an attorney in your area.

So does this mean my creditor can no longer harm me once four years has past?  Like most things in law, the answer is not exactly.

Let’s start with what the creditor cannot do.  The creditor can no longer successfully sue you for a judgment nor can they file a valid proof of claim for debt you owe them in a Chapter 13 bankruptcy case.  A debt this old is also called “time barred. ”

Now we get to what the creditor can do. 

A creditor can still send you a collection letter requesting payment.  You can send a letter asking for anything.  I could send you a letter asking for a pink hippo.  Just because I ask for it in the letter doesn’t mean you have to comply.  Even so, there is nothing overtly illegal in requesting you pay a debt, even if they no longer can sue you for the balance.

A creditor can also attempt to collect the debt using phone calls.  The Fair Debt Collection Practices Act (FDCPA) allows collectors to make contact once per day.

There is nothing barring the collector from attempting to collect a time-barred debt over the phone, however if they threaten to sue you they are violating the FDCPA because it is a thread to do something they aren’t able to do legally.  This could be classified as an idle threat at best. 

If you allow them, a debt collector will drive you nuts trying to collect an invalid debt, and if you make a payment to them to get them off your phone, you may inadvertently start the statute of limitations all over again.

You don’t have to put up with a debt collector’s constant phone calls!

Rather than give in to one of these snakes in the grass, ask them for a mailing address and send them a letter telling them to stop calling.  Its called a cease communication letter.  Send it certified, then if they call again they have violated the FDCPA.  Instead of collecting from you, they may wind up receiving a heavy penalty instead.

If its been more than four years since you paid a debt or you used a credit card and a debt collector comes calling, don’t give them a thing, just send a cease communication letter and remind them that they are SOL.  Their debt is beyond the statute of limitations and they can’t touch you.

Generally speaking, the creditor will wait until the debtor goes three months in past due before they file a motion for relief from stay, but sometimes they will wait longer or file earlier, and sometimes, as I experienced this morning, their motion will be   complete crap and will need to be fought appropriately.

The creditor filed their motion claiming my client was three months behind on their mortgage.  They weren’t.  The creditor claimed they hadn’t made payment in October, November, or December, they did.

Now generally speaking, a creditor will post a payment for the last due date.  If you miss June’s payment and then pay in July, that payment will be considered the June payment and you will be past due for July.

The creditor is required to plead that in their motion and if they have not proven that in their motion, the motion should fail.

This morning was the first time the creditor provided me with a payment history proving that my client was past due.

The problem is that this leads to an additional expense to the already financially strapped bankruptcy client.  The motion I defended today would have cost my client $750 if I had charged them, but since the client was a Chapter 7 client, there was no way my client was going to be able to pay this so I had to do it pro bono (this is called involuntary free work).

I already knew what the creditor was looking for even before we went to court today.  If I had just rolled over and allowed the creditor to get a stipulation for my client, I wouldn’t have had to appear in court today, in fact the judge gave the creditor’s local counsel a tongue lashing for it.  The creditor is fishing for a stipulation that would include their legal fees.  Their legal fees were $700 + the cost of filing the motion, which was $150.

This was essentially a fishing expedition by the creditor for $700 additional dollars that they were not entitled to.  It is a low risk proposition.  A lot of attorneys will take the creditor’s motion at face value, but when they are dealing with me they are dealing with a former debt collector, so I don’t have the trust instinct that other bankruptcy attorneys have.  It’s also a low cost investment for the cost of the motion because most of the time they will get that back in the stipulation.

This creditor filed a crap motion and today the judge gave me the option of arguing the motion and having it dismissed or continuing the hearing for two weeks and trying to resolve the matter with the creditor.

The vindictive, nasty, mean-spirited attorney in me wanted to argue the motion and have it dismissed but the more reasonable attorney in me decided to agree to continuance because now my client is bargaining in a position of strength rather than that of weakness, and that is the key to bankruptcy, controlling the situation rather than having it control you.

In science, absolute zero is where the temperature falls so low that molecules do not move.  It is the absence of energy, the absence of a capacity to change.

Absolute zero is a term I started using in 2008 and heard several other attorneys start using soon after.

In personal finance, absolute zero is when you are powerless to change your financial situation.  A person is financially at absolute zero when even if they devoted their entire after-tax income to pay off their unsecured debts that they would not be able to pay them off in a year.

Let’s take Sally (the names are changed to protect the innocent) for an example.  At the time Sally became my client, she was 26 years old, unmarried, two months pregnant and working full time for a local school district as an 8th grade teacher.

She had $15,000 in non-dischargeable student loan debts but also had $50,000 in credit card debt that was racked up by her ex-husband.  Since her name was on the card and he took off (with the babysitter no less) she was paying the minimum payments each month but not making any headway.

Sally was at absolute zero.  She had nothing she could sell and no equity in any real estate that she could tap into to pay off her debts.  She was an ideal candidate for Chapter 7 bankruptcy.  To be a candidate for Chapter 7 bankruptcy, your income needs to be below median (I will explain median in a later post) and you must not have had a bankruptcy discharge in the past 8 years.

That’s it.  That’s all it takes.

The press and some in the bankruptcy bar claim that it’s next to impossible to qualify for Chapter 7 bankruptcy.  The like to compare it to the Biblical camel going through the eye of the needle.

Its simply not true.  A bankruptcy lawyer can navigate through the means test and make sure you qualify for Chapter 7 bankruptcy, but if you do, you can file Chapter 7 bankruptcy and rather than spend the rest of your life making minimum payments and not getting anywhere you can reclaim control of your life.

Absolute zero doesn’t have to be a life sentence.

Sally filed her bankruptcy case, went to the meeting of creditors, completed the required credit counseling and credit management courses and got a discharge.  Her debt was wiped out.  A bankruptcy discharge means you don’t owe it any more!

If you find yourself at absolute zero financially and don’t see how you could get yourself out of debt, call a bankruptcy attorney, they can help, and if you happen to be in the LehighValley, particularly Lehigh, Northampton, or Berks county, you can call my office at 1-800-801-7427 and set an appointment.

]]> http://pennsylvaniabankruptcyinfo.com/what-is-absolute-zero-and-how-does-it-effect-my-bankruptcy/feed/ 0