By:Mike Cibik


How Trump’s Bankruptcies Differ from Others


Any business person will tell you that declaring bankruptcy is a common practice. Now when I say bankruptcy, I am talking about a business bankruptcy. This is how a business stays afloat unless the owner decides to sell it. It’s is a way for a business owner to only get penalized for his business mistakes. This type of bankruptcy does not touch any personal assets, such as a car and home. Instead of a personal fresh start, like a Chapter 7 or Chapter 13, the business can start over.


With Donald Trump, his bankruptcies were not personal (Chapter 7); they were corporate. Trump himself did not declare bankruptcy – his bankruptcy lawyers did. They know bankruptcy law to the “nth” degree. They know how to negotiate payment plans with creditors. With a corporate bankruptcy, a business owner must:


  1. Reorganize the company.
  2. Repay corporate debts through a payment plan.
  3. Develop a corporate budget.
  4. Get the payment plan and budget approved by the creditors and the bankruptcy court.


So, when it comes to Trump’s bankruptcies, they are much less painful than the average business owner. The average business owner does not have expensive assets that he can just sell off to make loan payments. He does not get more time to make payments or have the ability to negotiate his stake in a company. However, Donald Trump does.


The Fallout from the Bankruptcies


Donald Trump has filed declared bankruptcy six times.


  • Trump Taj Mahal 1991 – He only lost 10% stake in the casino. Trump financed the construction of the casino with junk bonds. However, he was unable to pay the high-interest rates. This was the only time he had a personal debt – $900 million dollars. Although it was a corporate bankruptcy, he decided to sell off Trump Shuttle Airline and his Trump Princess 220-foot yacht to reduce his personal debt.   


  • Trump Castle and Trump Crowne Plaza 1992 – He reduced his share to 25%.  


  • Trump Plaza 1992 – He gave up a 49% stake in the hotel. He remained the CEO but had to give up his salary. It’s important to note that Trump consolidated Trump Taj Mahal, Trump Castle, and Trump Plaza. Thus, he considers this one bankruptcy.  


  • Trump Entertainment Resorts 2009 – He ended up with a 10% stake. The bankruptcy was due to a missed bond interest payment.


As you can see, the main result is that Trump’s stake in these bankrupted companies was reduced. He has effectively distanced himself from them. The only time Donald Trump had personal debt was in 1991. Yet, it was no big deal to sell off his airplane and yacht. The majority of us cannot do this. After this bankruptcy, Trump learned to stop using his own wealth to back loans. He even admitted to using the bankruptcy laws to his own advantage. He also used his name to leverage his percentage of reorganization equity. It would have cost more to remove his name and rebrand, which is why stakeholders decided to keep it. And if his name wasn’t attached to the properties, people would not associate him with bankruptcies.


The main goal of a business bankruptcy to reorganize the business. Donald Trump has managed to create benefits, such as publicity and making money – even though he reduced his stake, the businesses still brought in money. And as much as we would like to blame Trump for his casino bankruptcies, the struggling gaming industry of the 1990s played a large part in their downfall.


Using Bankruptcy to Stay in Business


We have learned that Donald Trump has declared bankruptcy several times and came out relatively unscathed. He and his team of bankruptcy lawyers know how to play the corporate game. Trump was able to use his own assets to reduce his debt – only once. The rest of us aren’t so lucky. However, it’s a smart move to keep your company in business. It’s also a way to make it more efficient too.


Trusted Bankruptcy Advice


If you need guidance for a Chapter 7 or a Chapter 13 bankruptcy, contact the experienced bankruptcy attorneys of Cibik & Cataldo at (215) 735-1060. We offer a free consultation to review your case and to determine which type of bankruptcy is right for you.


We can help protect your assets too, such as your home or car. Remember, a bankruptcy can stop a foreclosure and lawsuits against you. Declaring bankruptcy is does not mean declaring defeat. It’s just another financial solution. Contact us today to schedule your consultation!



By:Mike Cibik

Reason Why People File for Bankruptcy

Filing for bankruptcy can save money and offer peace of mind. There are also the downsides. Bankruptcy is very expensive and takes up a lot of your time. At the end of the day, however, it’s very much worth it.


Here are some reasons why people file for bankruptcy, according to the American Bankruptcy Board Certified attorneys of Cibik & Cataldo PC, who have provided high-quality debt relief in Philadelphia for the last 35 years.


Job Loss – Sure, there’s the severance pay, but there’s no guarantee knowing when that new job will come around. Losing a job obviously depletes someone’s savings and assets.


Medical Expenses – Medical expenses make up more than 60 percent of personal bankruptcies in the United States. It can be almost impossible for someone to pay for the medical attention they need on their own most of the time.


Credit Debt – Illnesses and disability, job loss, income reduction and emergency expenses are some reasons for credit card debt that doesn’t involve irresponsible spending.


Divorce – A divorce or separation can lead to a huge loss of income and assets for either partner or both. Those lawyer fees add up too.


Overspending – Poor budgeting and not being able to control your spending.


Types of Bankruptcy to Choose From

There are two types of bankruptcy that you can file, Chapter 7 or Chapter 13.


A Chapter 7 bankruptcy discharges most types of unsecured debt and the trustee will attempt to sell any nonexempt property in an effort to repay their creditors. Chapter 7 bankruptcy is most commonly used for businesses and individuals.


In regards to the business aspect, the trustee who is handling the case goes through an intense process of assessing how every part of the business is running and then will either decide to shut down the company (if it is smaller) or sell off parts of it (if it is large).


For individuals, Chapter 7 lets them keep certain property, but if the state deems it as not exempt, it is to be sold by a trustee, and that money is used as a liquid asset to pay the creditors. If you’re lucky, your debt can be discharged if you fall into the categories of people who owe:

  • Child Support
  • Some Student Loans
  • Income taxes less than 3 years old


It is good to keep in mind that Chapter 7 bankruptcy can stay on ones credit history for up to a decade. So before filing, make sure you are ready to have that on your record for a long amount of time so no credit issues will surface when trying to make purchases once you are back on your feet. Chapter 7 bankruptcy normally takes about 3-to-4 months to finish.


Creditors with Chapter 13 bankruptcy, meanwhile, repay creditors through a repayment plan. No property is liquidated under Chapter 13 bankruptcy, only reorganized. Chapter 13 can immediately stop foreclosure for the term of repayment; it can also allow for a “super discharge” of debts, the kind that are not allowed under Chapter 7 bankruptcy.


There are many reasons why a person may choose to file for Chapter 13, but the most common reasons are:

  • Individuals facing an imminent repossession of property.
  • Individuals facing an imminent foreclosure on their home or other real estate.
  • Individuals who have recently lost their primary source of income but do not want to lose their property.
  • Individuals with a poor credit score who, due to current financial situations cannot pay off debt quickly.


Chapter 13 bankruptcy can take 3-to-5 years to finish which is much longer than the amount of time Chapter 7 requires. But, Chapter 13 bankruptcy can only stay on your credit history for 7 years, opposed to the decade Chapter 7 stays on for.


It is important to choose one of the bankruptcy plans listed above that fits you and your current situation best. Talking to an experienced attorney will help clear the air of any unanswered questions and help put your mind at ease knowing that someone is on your side.


At Cibik & Cataldo P.C., we never assume that your financial situation is the same as anyone else’s. Our team of dedicated attorneys are here for you and will work with you on your case, no matter how big or how complex it may be. Declaring for bankruptcy is never a proud moment, but is a great tactic to get you back on your feet financially.


Our legal team supplies top-notch debt help in Philadelphia, PA, and surrounding areas. To learn more about bankruptcy services and the certain areas of bankruptcy our attorneys specialize in, contact us at (215)-735-1060.  We also offer a free consultation through our website so you can get the feedback you need fast.


By:Mike Cibik

The U.S. Territory’s Struggles to Pay Off Creditors


There have been several times a city or municipality has declared bankruptcy because they ran out of money. Detroit, for example, declared bankruptcy in 2013 for 18 billion dollars. Bankruptcy was the only solution for the city. Why? Because there were many factors set up the city for it, such as:

  1. Rising pension costs;
  2. A crumbling infrastructure;
  3. Taxpayers leaving the city; and
  4. A credit downgrade for the city.


But what happens if you don’t have this solution? What if you had to find a “back door” to filing bankruptcy? This was the case for Governor Rosselló of Puerto Rico. Unfortunately, Hurricane Maria was the last straw for the island. The small U.S. territory was already having problems paying back creditors before Maria. Now that the island has been virtually destroyed, it would take a miracle for Puerto Rico to make a comeback in the next few decades. After all, New Orleans is still rebuilding after Hurricane Katrina.


What puts Puerto Rico in this tough spot is the fact that it cannot declare bankruptcy, like any U.S. city, because it is a territory. In 1984, Senator Strom Thurmond added an amendment to bankruptcy law excluding Puerto Rico from filing a Chapter 9 bankruptcy. By declaring a Chapter 9 bankruptcy, Puerto Rico could wipe out billions in municipal debt. A Chapter 9 bankruptcy is similar to a Chapter 11, where instead of the reorganization of a company, there is a reorganization of municipalities and cities. It also includes villages and taxing districts. It protects while creating a payment plan through negotiations with creditors. To add fuel to the fire, many creditors have sued Puerto Rico, trying to recoup the money they invested in bonds issued by its government. Unfortunately, they won’t get back much, if anything.


The Puerto Rican government has taken drastic measures in trying to find the money to pay off creditors by:

  • closing nearly 180 schools;
  • raising electricity and water rates; and
  • increasing sales tax to 11.5%.


Even with these measures, bankruptcy is the only option.


Creditors Loved Puerto Rico   


Creditors loved to invest in the island because there is a provision in its constitution that essentially says the government has to pay “general obligation debt services” before any other expenses. This guaranteed a return on their investments. Now, this provision doesn’t hold any weight since the government has defaulted several times on loans.


Using PROMESA Law to File Bankruptcy Protection


There is a way Puerto Rico could file bankruptcy – through PROMESA. PROMESA is the Puerto Rico Oversight, Management and Economic Stability Act. It was passed by Congress in June 2016. Under Title III of PROMESA Law, there is a court restructuring process. It would give Puerto Rico the ability to negotiate small payments with creditors. It is now up to a judge to determine how Puerto Rico’s debts will be restructured, much like the IRS setting up a payment plan for Chapter 13 filers. However, the judge does not have the power to seize any assets without authorization from the federal control board.


Governor Rosselló’s decision to ask for this form of bankruptcy came after creditors rejected proposed payments. The island owes $123 billion, the largest in the history of a U.S. state or territory. Recently, the House of Representatives recently voted in favor of the PROMESA Act. This gives Puerto Rico a fighting chance at recovery. With PROMESA, a judge can force creditors to accept a settlement.


With this form of bankruptcy, the $17 billion of sales tax-backed debt known COFINA debt will likely be pulled into the bankruptcy or will be put into a separate bankruptcy case. It will also freeze the numerous lawsuits against Puerto Rico.


Puerto Rico had no other choice than to use the PROMESA Act to bail themselves out. If they had statehood, then they could have declared a Chapter 9 bankruptcy a long time ago. Hopefully, the settlement will be one that Puerto Rican government can handle.


Bankruptcy Help in Philadelphia


At Cibik & Cataldo, we help people from all walks of life get a fresh financial start. No matter the scale of bankruptcy (Chapter 7, Chapter 9 or Chapter 13), we will help you get through your bankruptcy. We offer a free consultation to give you bankruptcy facts so you know what debts will be wiped, what the payment plan will be or how your company will be reorganized. There are no surprise fees. Contact us today at (215) 735-1060 to get out of your financial situation.




By:Mike Cibik


Pennsylvania Medical Bankruptcy: When to File Due to Medical Debt


No one plans to get sick or get into a debilitating accident. We pay exorbitant amounts for health insurance for such events. Depending on the health plan you have, it might only cover a fraction of the medical expenses one incurs. If you don’t have health care, the costs for care are astronomical. There will also be other costs, such as gas for going to the doctor’s, treatment centers and hospital. And if a spouse must take time off from work, it becomes unpaid leave after a certain number of weeks or may have to quit his or her job (or to take care of a family member), reducing the family income by as much as half. It’s not uncommon to hear of fundraisers for those stricken with an illness, which help but are usually not enough to make a dent.


If 25% or more of your income is going toward medical bills, you might want to consider filing for medical bankruptcy. This type of bankruptcy is no different than filing or a Chapter 7 or Chapter 13 bankruptcy. With a bankruptcy, some debts take priority over others and cannot be discharged. The debts that take priority are ones that are secured (collateral is put up as payment) and cannot be wiped (discharged). These debts include child support, alimony, and student loans. Medical bankruptcy is considered a non-priority, unsecured debt meaning it can be wiped without having collateral. The only catch is that you must be eligible for Chapter 7 (personal bankruptcy).


In earlier blogs, we discussed the requirements for Chapter 7 and Chapter 13 bankruptcies. With a Chapter 7, you must pass the means test and have little to no assets. There is no limit/cap on the amount of debt you can discharge. And with a Chapter 13, you must earn above the median Pennsylvania income and have assets. You’ll be put on a payment plan set up by the IRS too. Once you make all the payments, the rest of the debt will be wiped away. However, just like being eligible for a Chapter 7 bankruptcy, there is a catch for a Chapter 13. The catch is that there is a debt limit. Chapter 13 is for those who have less than $394,725 total in unsecured debts. Also, they must have less than $1,184,200 in secured debt.


When Medical Bankruptcy is the Solution


There are other options to pay medical bills:

  • Negotiate with the medical provider on a settlement. If a collections agency is contacting you, you can negotiate with them as well.
  • Ask the billing department if you can set up a payment plan.
  • Ask your doctor’s office or hospital if there is an assistance program. Many times, there is a local charity that can help offset costs.


If these options do not provide the permanent relief you need, then medical bankruptcy is the solution. At Cibik & Cataldo, we know that bankruptcy is not what you want. You’re afraid of what people may think of you for taking this route. Believe us; it is not an easy route to take because it involves a deep look into your finances and having you gather the paperwork, such as creating an itemized list of your expenses and financial transactions from the past two years. There are millions of people who are in a similar situation and have filed for bankruptcy. You’re also afraid that declaring bankruptcy, whether for medical bills or not, will hurt your credit score. Yes, it will hurt your credit score, but so will late and missed payments on your credits cards because you paid your medical bills with them, and maybe even maxed them out in the process.


Discharging Only Medical Debts


Some believe that you can discharge only medical debts in bankruptcy. This is not true. When you declare bankruptcy, you must put all of your outstanding debts on it, secured and unsecured. However, this is a good thing because it simplifies your finances and the bankruptcy process. This will give you an absolute fresh start. It will relieve a large burden so you can focus on getting better (or focus on your loved one who is ill) and get back on track financially. You’ll also be able to concentrate on getting a new job if you had to quit your old job due to the medical situation.


If you think you will endure future medical bills, such as another round of chemotherapy, then you should wait to file for bankruptcy since you can only file for Chapter 7 bankruptcy every eight years. If you have been discharged from a Chapter 7 bankruptcy and need to file a Chapter 13 bankruptcy, you’ll only have to wait four years. However, if you never received a discharge from the bankruptcy, no matter the bankruptcy type, then you don’t have to abide by the time limits.


Medical Bills By Default


Some are forced to declare a medical (Chapter 7) bankruptcy. If you are divorced and your ex files a Chapter 7 because of medical bills, you can be included in the bankruptcy if you co-signed on a loan(s). Even though are you are able to pay your own bills, you cannot pay the outstanding debt too. Thus, filing for bankruptcy is the best solution.


We must warn you about consolidating your debt with a consumer credit counseling service. The creditors may make a payment plan with you and you think that’s it. However, this agreement is not set in stone. The creditors can come back and try to get the rest of the money at a later date, in which you end up filing bankruptcy. This is why it is vital to contact a bankruptcy lawyer if you are thinking about using one of these consumer credit services or filing bankruptcy. Talking to an experienced bankruptcy lawyer can prevent additional interest charged by a creditor and protect your home from foreclosure.  You’ll also get bankruptcy facts and what is involved with filing.


Don’t Face Bankruptcy Alone


When you need solid bankruptcy advice, turn to Cibik & Cataldo, the Philadelphia bankruptcy attorneys. For over 40 years, we have helped tens of thousands of people like you get the bankruptcy information they need to make an educated decision on whether or not to file for bankruptcy and which type of bankruptcy is best for their particular needs.


We are ABC certified, so you can trust we know the United States Bankruptcy Code inside and out. We stay on top of the latest code changes to give our clients the best counsel and our fee is cost-efficient. Contact us today or call (215) 735-1060 to set up your free consultation!



By:Mike Cibik


How to Rebuild Your Credit After Filing For Bankruptcy


Would you believe that the concept of a credit score was created almost 30 years ago? The FICO (Fair Isaac Corporation) score was established in 1989. Before then, there was no uniform system of calculating one’s credit score. A person’s credit history was created by the records kept by neighbors and merchants. Could you imagine relying on your neighbor Bob to judge your credit? What if you got into an argument with him? It could be bad for both you and your credit report.


In the early 1800s, Merchants decided to come up with an unbiased way to generate a person’s credit report. It was based strictly on the purchases, costs and when they were paid (or paid off). The best part of a credit report back then was that when you moved to a new region, your report was wiped clean –  as in the saying, “to wipe the slate clean.” There have been many credit records written and stored in different agencies throughout the years, but it all has boiled down to the top three credit reporting agencies: Experian, TransUnion, and Equifax.


Today, we solely rely on FICO scores. This score tells you and creditors how good your credit is. It’s easy to check your score, and it’s a good idea to keep your credit monitored.


Credit reports contain vital information about you and your spending habits, much like your bankruptcy case. Many who have filed for bankruptcy believe that their credit will be ruined for the rest of their lives. Bankruptcy is a serious mark on your credit report, but that mark won’t be there forever. Now that you have been discharged, you should start to build your credit. You’re probably thinking: Wait! I have been through enough; I am going put off building my credit for a while. But, why wait?


Building Credit after Chapter 7 Bankruptcy


At Cibik & Cataldo, we have filed over 20,000 personal bankruptcies. We have seen clients who feel like they have hit rock bottom and have managed to climb their way back to a better financial future. You can have great credit again, but it will take some time and work. You can’t expect to be great shape after only one workout.


Easy Ways to Get your Credit Back on Track


Apply for an Unsecured Credit Card: After you have been discharged from a Chapter 7 or Chapter 13 bankruptcy, you want to start small. We suggest getting an unsecured credit card. This type of credit card is designed for those whose credit has been damaged by bankruptcy. You have to put a deposit down on these cards, such as a Fingerhut Credit Account or a First Access Visa Card, unlike with a secured credit card (some credit cards have an annual fee.)


Once you have gotten one of these credit cards, you want to make a small purchase (e.g. a song on iTunes or a Kindle book on Amazon,) and you should pay it off as soon as you can. However, it is okay to have a small balance on the card just as long as you can pay it off quickly. From there, you can start to make bigger purchases and more frequently. You can also ask the credit card company for an increase in your credit limit. After a few years, you’ll be ready for a secured credit card.


It’s important to note the difference between an unsecured credit card and a prepaid debit card. A secured credit is used to build your credit and requires a deposit. If you don’t pay your bill, the money is drawn from the deposit. A prepaid credit card is one where you “load” money onto it. If there is no money on it, you can’t pay your bill. This type of card will not help you build your credit because if you use it for automatic purchases (i.e. Internet hosting bill,) and there isn’t enough money on the card, you will get hit with a late fee for nonpayment. Remember, any late payments go on your credit report.


Pay Existing Debt: You should pay whatever existing debts you have on time and pay them off. These could be debts that were not listed in the bankruptcy.


Get a Credit Builder Loan: This type of loan helps build your credit and is offered at Credit Unions. For example, you can get a $1,000 loan and put it into a CD. Make the payments on time, and the bank will report it to the “big 3” credit bureaus (TransUnion, Experian, and Equifax.) After 12 months, you will have paid off the loan and have $1000! It will also help you create a budget for the loan.


Become a Credit Card Authorized User: You can become an authorized user on someone else’s credit card. You won’t legally be responsible for the debts because the credit card is not under your name. However, if the account holder does not pay the debt or is late with payments, it will hurt your credit score. It’s also a great way to teach your child how to responsibly use a credit card.


Get a Cosigner: Ask someone you trust to co-sign on a loan or credit card with you. This shouldn’t be handled lightly because, again, you are putting the other person at financial risk. And, it’s much easier to get a car loan, especially if you have a cosigner.


Get the Facts Today


We offer a free consultation to help you navigate through bankruptcy. We don’t leave you high and dry once your personal bankruptcy case is done; we help you get the tools you need to build your credit history up again to where you can purchase a new home or car without worrying about your credit.


There was a time not too long ago where there were millions of bankruptcies discharged. These people (individuals and families) have learned how to get their credit score back up to above a 700 and so can you. Aside from being on a new budget and creating a new lifestyle, waiting is the hardest part.


Fortunately, there are more credit resources for those who declared bankruptcy today than there were 20 years ago. And, there more reasons for declaring bankruptcy, other than unwise spending. The economic downturn ten years created a new financial landscape. At Cibik & Cataldo, our legal staff will give you the peace of mind and expert guidance needed during this stressful time.


If bankruptcy is the solution to your financial problems, let us be your advocate. We know the consumer bankruptcy laws of Pennsylvania and how they apply to your unique case. Contact us today at (215) 735-1060 to set up your consultation. We can meet at a time that works for you. We are located in Center City, Philadelphia, close to SEPTA trains and bus routes.



By:Mike Cibik

Personal Bankruptcy and Its Evolution


When people hear the word “bankruptcy,” they cringe. That is understandable because of the stereotype that goes along with bankruptcy. We all have financial problems; the financial collapse of ten years ago is still plaguing people to this day. The world has changed, and so has our thinking when it comes debt. Bankruptcy has also changed a great deal over the past 20 years. People viewed bankruptcy as the final strike against someone’s credit and that they would not be able to recover from it. Some also thought that bankruptcy was declared by those who were careless with their money or were trying to cheat “the system.” No one wanted to admit that he or she had declared bankruptcy. They felt shamed by it and put into a group that had to have special financing just to get a car and were punished with high interest rates. However, the majority had just fallen on hard times. The psychological effects of bankruptcy are still there, even after one has bounced back and come up with a new financial plan. However, there is always the worry that it could happen again.


Now, the idea of bankruptcy has changed. It is still a last resort, but is no longer a black mark on one’s financial history. There is still the shame of bankruptcy, but it is not as harsh. People are understanding bankruptcy better today than 20 years ago. According to NerdWallet, the number of bankruptcies in 2007 was 822,500. That number rose sharply to over 1 million per year from 2008 to 2011. With so many bankruptcies being petitioned, people have been forced to change their thinking, especially those who criticize others who have declared bankruptcy.


There have been more financial resources to help those trying to pay their debts before resorting to bankruptcy, such as credit counseling companies and making an arrangement with creditors. However, some cannot handle the high monthly payments. So, what has led people to declare bankruptcy?


Top Three Reasons for Declaring Bankruptcy in PA

There are a number of reasons why people declare bankruptcy. Personal bankruptcy is a way to start fresh financially. It’s also a second chance at learning how to manage personal finances more efficiently. As bankruptcy lawyers, we have come across many reasons for why bankruptcy was the solution. We will discuss the top three reasons for filing.


Reason #1: Medical Bills

Everyone knows someone who has been diagnosed with a crippling medical condition. This can be extremely costly not only to a person’s health but also with their finances. With treatments, surgeries, medical visits and other expenses, the bills can add up. Plus, if a spouse has to take time off, it could affect his or her income as well. As we all know, US health insurance does not cover much. People end up having to use up their savings, college funds and even home equity to pay off the bills, but sadly sometimes that can still not be enough. To solve this problem, sometimes people will turn to bankruptcy. Chapter 7 bankruptcy is chosen over Chapter 13 in these cases because the debtor has no way to pay the creditors.


Reason #2: Job Loss

With the economic downturn ten years ago, many people lost their jobs. With the state of the economy at that time, it was difficult to find another job quickly or at all. Not only is it devastating on a personal level, but it is also overwhelming on a financial level too. Even if a person did find another job, chances are that it was a salary less than what they were used to. Now, to make up for the lost income, some relied on credit cards to carry them to their next paycheck. Over time, this only made matters worse and the only solution was to declare bankruptcy. There is no judgment; people were doing what they had to survive. With the job loss, there was also the loss of health insurance. COBRA, temporary health coverage, is very expensive, in which few can afford.


Reason #3: Poor Credit Card Management

There are people who have misused their credit cards to the point where they have over $50,000 in debt, compared to the average household debt of $7,000. The reason for getting credit cards is to start a credit history by buying big-ticket items, such as a big-screen TV or refrigerator. However, people have used credit cards for shopping sprees they could not afford, buying clothes, furniture, electronics, etc. A big reason for this is that they were not taught how to manage their money growing up. With the rise in online shopping, excess spending has reached new heights. Also, technology has evolved rapidly and people find themselves buying a TV or gaming system and upgrading frequently as new versions come out. In addition, credit cards, as mentioned above, are used to pay for necessities during a catastrophe, such as a job loss, a house fire or illness. When filing for personal bankruptcy in this instance, Chapter 13 is applicable, especially due to the new bankruptcy law.


New Bankruptcy Law of 2005

In 2005, a new bankruptcy law went into effect making it harder for people to file bankruptcy, namely Chapter 7. This new law made people prove that they could not pay their debts, which was done with the “means test.” Many were found to be able to pay some of the debt, so they were forced to file for Chapter 13 bankruptcy. The IRS determined the payment plan under this type of bankruptcy. The attorney fees increased because more time was needed to provide documentation. Consumers were required to complete credit counseling before filing bankruptcy as well.


A Pennsylvania Bankruptcy Law Firm

Declaring bankruptcy is not a true reflection of who you are. Too many times, clients feel that they are “marked” for life because of the events that led them to bankruptcy. We are here to tell you that this is not the case. As the economy changed, so has the stigma attached to bankruptcy, not to mention the bankruptcy laws. Remember, bankruptcy was an idea our forefathers brought to the new world. It is a way to help those in dire financial situations to start over again.

Understanding bankruptcy might appear to be intimidating, but the lawyers at Cibik & Cataldo are here to help you through the process and get that new start. You will be able to get back on track with your finances and build a better credit score. We are located in Philadelphia, just minutes from the major bridges and easy to get to using SEPTA transit.

If you are going to file for bankruptcy, you contact us at Cibik & Cataldo today at (215) 735-1060. We offer a free consultation to let you know where you stand. We’ll help you create a plan for before, during and after bankruptcy. Filing for bankruptcy, whether it be Chapter, 7, 11 or 13, is a serious action, but one that makes your situation easier to handle. We know taking the first step is hard, but you can count on our experience and expertise to resolve your issues.



By:Mike Cibik

Advantages and Disadvantages of Filing for Chapter 7 Bankruptcy


In today’s economy, it is very easy to get into financial trouble. A business venture failed, or a divorce caused bills to pile up and getting caught up was not possible. There many forms of bankruptcy, which are called chapters. In this blog, we will focus on Chapter 7 by looking at the advantages and disadvantages of filing for Chapter 7 Bankruptcy.


Do you know when bankruptcy started? With Our founding fathers? No, go back further. It dates back to the Bible. In Deuteronomy Chapter 15: “At the end of seven years you must cancel debts.” The founding fathers took this idea and created the laws of bankruptcy because they knew people would face economic hardships and did not want them to be trapped by them. So, as you can see, declaring bankruptcy is not a new idea nor one to be taken lightly. You must think long and hard before making this decision because it does go on your credit report and will cause credit issues for a while.


Chapter 7 Bankruptcy is when you are unable to pay your debts. Your assets are liquidated, and the proceeds go to the creditors to settle the debts. This should be seen as a last resort and is primarily used for business owners. You may feel that you are alone and that it is shameful to have to declare Chapter 7. You shouldn’t feel this way. There are plenty of famous people out there who have filed, such as Walt Disney, Henry Ford, and Donald Trump. And there are plenty of businesses that have filed as well, such as Bank of New England, GameCrazy and Macy’s.


To declare Chapter 7, you must be sure that you are not eligible for Chapter 13, where you can pay back some of the money owed to creditors. The whole point of Chapter 7 is to give the debtor a new start. There are criteria for filing Chapter 7 bankruptcy, such as:

  • Your income must be equal to or below the median income in your state.
  • If your income is above, you will have to take a “means test,” which is a calculation used to prevent those who have high incomes from filing Chapter 7 instead of Chapter 13. It is a way to determine your monthly disposable income over six months prior to filing. If you don’t pass the means test, you’ll have to file Chapter 13, where you will be required to make payments to creditors over a five-year period.
  • You must attend credit counseling prior to filing. If you failed to attend, then you cannot file.


How Chapter 7 Works

According to, you must file bankruptcy in an area where you live or where your business is located. You must file with the court:

  • Schedule of Assets and Liabilities
  • Statement of Financial Affairs
  • Schedule of Income and Expenditures
  • Schedule of Executory Contracts and Unexpired Leases


You must also provide tax returns or transcripts of tax returns before and during the bankruptcy process. There is a cost to file; the amount depends on how you are filing – a business owner, a single person or as a couple. This cost is usually more for a business owner since the case is more complicated.


Once you have filed, you will be appointed a trustee. This person will also determine if Chapter 7 is applicable to your case. The trustee can revoke the Chapter 7 based on fraud or an error in the paperwork. It is important to note that not all debts will be cleared. Debts not discharged include:

  • Alimony
  • Child Support
  • Student Loans
  • Certain Taxes
  • Debts for Death & Personal lnjury (e.g. DUI)
  • Post-petition HOA fees
  • Debts for crime restitution orders


You can reaffirm a debt, meaning you can make a payment arrangement with a creditor.


The Negatives of Chapter 7

Although the main idea in filing Chapter 7 is to help the debtor financially start over again, there are negatives to filing.

  • Not for business owners who want to remain in business. When you declare bankruptcy, the business will be closed.
  • It won’t allow you to make past due payments like Chapter 13.
  • Your property could be subject to liens and mortgages that could go to the creditors.
  • You must reaffirm a debt before filing bankruptcy for it be not included in the bankruptcy.
  • Remains on your credit report for 10 years.
  • Loss of all credit cards.
  • Can’t file Chapter 7 bankruptcy for another six years.
  • It won’t get rid of student loans.
  • The court can convert the Chapter 7 to a Chapter 13.


Positives to Filing Chapter 7

It may sound odd, but there are some positives to filing.

  • Bankruptcy process takes 3 – 6 months.
  • Most states have exemptions that allow you to keep some things. In Pennsylvania, the exemptions include:


  • Equity in Your home (if you own it)
  • Personal Property (i.e. clothing)
  • Wages
  • Pensions
  • Insurance or Annuity Payments
  • Public Benefits
  • Wildcard
  • Business Partnership Property
  • You will be able to keep your wages and property purchased after filing for bankruptcy.
  • You can get credit cards 1 – 3 years of filing. There are credit cards that strictly for people who have filed bankruptcy.
  • You can always file for Chapter 13 after filing for a Chapter 7.
  • Gives you some financial relief.
  • Bankruptcy prevents lenders from aggressive collection actions.
  • The number and amount of debts that a bankruptcy can relieve you of are numerous.
  • There is no specified amount in order to file for relief.


Cibik & Cataldo Can Help with Chapter 7 Bankruptcy

You don’t have to face creditors alone. At Cibik & Cataldo, we have over 35 years of experience in bankruptcy law serving Southeastern Pennsylvania. We are ABC certified and know the bankruptcy laws that affect consumers and businesses. We also know all the exemptions that can help protect more of your assets and help you pass the “means test.”


We offer a free consultation to help you understand the financial position you are in and if Chapter 7 is right for you. If you do need to file for Chapter 7, we will help you with each step of the process so you will know what to expect. We will make sure all of the paperwork is accounted for and filed properly. Our primary goal to make sure your case goes smoothly. We’ll also provide guidance on life after a bankruptcy.


Contact Us Today


At Cibik & Cataldo, we are the Philadelphia bankruptcy lawyers – it’s all we do. We are here to help you navigate through the Chapter 7 process. There is life after bankruptcy. Schedule your free consultation by calling us at 215-735-1060 or emailing us. We can set up a meeting that works with your work schedule. We also offer 24/7 support!



By:Mike Cibik


Filing Pennsylvania Bankruptcy on Back Taxes

No one likes to deal with taxes, especially back taxes. Back taxes are taxes that weren’t paid in the year that they were due. The IRS will hand over the amount of back taxes to a collections agency. If you can’t pay the amount, the IRS often lets taxpayers negotiate a lesser amount through an “offer of compromise” or payment arrangement (installment agreement).


But what if you declared bankruptcy – can you include the back taxes in the bankruptcy petition? This is a tricky question because you can discharge back taxes but there are exceptions. If you have declared Chapter 7, the taxes can be denied depending on their type. If you claimed Chapter 13, you would have to pay them since you have entered into a payment arrangement.


This arrangement will require you to make a minimum monthly payment of 2% of the balance. It is important to note that if you make an offer of compromise, this arrangement can waive the interest and fees and even some of the underlying taxes. However, with an installment agreement, the penalties or accrued interest won’t be waived.


Of the two types of bankruptcy, Chapter 7 is the way to go if you cannot pay the back taxes at all. Chapter 7 will wipe all debts, but to wipe out the federal taxes, they must qualify for discharge. If you can’t discharge the tax debt, you’ll have to file a Chapter 13 and make a payment arrangement.


Discharging Federal Taxes

Federal back taxes can be released if they meet these requirements:

  • The taxes are income taxes only. Payroll taxes, fraud penalties, trust fund taxes or withholding taxes from an employee’s paycheck by the employer are not eligible for discharge. Also, sales tax is not dischargeable in Pennsylvania bankruptcies.


  • You did not commit tax fraud or willful evasion. Willful evasion is more than just not paying the taxes. It also means that when you filled out the tax return, you used:
    • A fake social security number.
    • A different name.
    • A different spelling of your name.


  • It also means that if you repeatedly failed to file your taxes or filed a blank or incomplete tax return.


  • The Three-Year Rule – The taxes are overdue by three years before filing bankruptcy. If you file for an extension, the three-year period starts from the date that the taxes are due under the extension.


  • The Two-Year Rule Your income taxes must be filed at least two years before you file the bankruptcy petition. If you file a tax return late, this counts as not filing it, which can damage your chances of discharging the debt.


  • The 240-Day Rule The income tax debt was assessed by the IRS at least 240 days before you filed your bankruptcy petition or not even assessed.


  • Substitute Forms – They can be filed by the IRS when you haven’t filed a tax return. The discharge depends on whether the IRS filed them with or without your permission.


  • Consensual Substitute Forms – Substitute forms that are filed by the IRS with your permission.


  • Non Consensual Substitute Forms – If the IRS files substitute tax forms on your behalf without your permission, the taxes may not be discharged. You cannot make the taxes dischargeable by filing a form after the IRS filed the substitute forms. Sometimes substitute forms are incorrect – they can overestimate the taxes owed. It is important that you have the substitute forms reviewed by a bankruptcy attorney.


Tolling the 3-2-240 Rules

Tolling means to suspend. The 3-2-240 rules can be tolled because of:

  • An Offer in Compromise


  • A Previous Bankruptcy


  • A Taxpayer Assistance Order – This order is filed by you (the taxpayer), your tax attorney or the National Taxpayer Advocate. It is issued because you are going through a significant hardship caused by the IRS revenue laws.


If you make a payment installment with the IRS, you should stop the payments upon filing for bankruptcy. The IRS cannot make collection attempts while you’re protected by the automatic stay of bankruptcy.


Ordering an Account Transcript

Since there are different dates associated with discharging federal taxes (due date, filing date, and assessment date), you cannot use your last tax form in the bankruptcy petition. You will need to order an account transcript (literal transcript) from the IRS. You’ll need each year for which you owe back taxes. The account transcript will show the required dates for the 3-2-240 rules. Do not confuse an account transcript with a tax return transcript. A tax return transcript will not have the dates you need on it.


Even if you cannot pay the back taxes, you should still file your tax forms. You don’t want to incur the tax penalties for not filing, which are audits, unable to discharge taxes in the bankruptcy or criminal prosecution. If you know you are going to be late in filing them, get an extension. The penalties are much less for filing late than not filing at all. And there’s the issue with federal tax liens.


Dealing with Federal Tax Liens

The IRS can place a federal tax lien against your property even after a Chapter 7 discharge. You must clear the title by paying off the lien before selling the property. You can deal with them after bankruptcy by:

  • Voluntary Release of a Post-Charge Tax Lien – This means the IRS can release the tax lien on the property after the bankruptcy discharge (the taxes were dischargeable) and there is little property.


  • Settlement of the Tax Lien – You can negotiate a settlement of the tax lien if you have substantial nonexempt properties.


  • Payment of a Tax Lien – In Chapter 13, you can pay the tax lien as a secured debt; it will be removed after the bankruptcy discharge.


  • Expiration of Federal Tax Liens – Most tax liens expire after a 10-year period. It is not advised to wait out the 10-year period.


If the IRS refuses to remove the tax lien, you must notify your tax bankruptcy lawyer. He or she may have to file an action for violation of the discharge. Remember, the IRS and other taxing agencies are not exempt from the laws protecting discharged debtors.


Cibik & Cataldo Can Help

The tax laws are complicated enough without adding bankruptcy to the mix. The experienced bankruptcy lawyers at Cibik & Cataldo can help you understand these laws and how they apply to your bankruptcy, especially with back taxes. We can also determine if you can discharge your income taxes and which type of bankruptcy is best suited for you.


Our goal is to keep you informed and to know what to expect in a bankruptcy process. If you are thinking of declaring bankruptcy that would include back taxes, contact us today at (215) 735-1060 to schedule a free consultation.



By:Mike Cibik

Toys ‘R’ Us Shocked The World by Filing for Bankruptcy


1957 was a truly different time and place for retail stores in America. During that year, Charles Lazarus opened his first Toys ‘R’ Us store in Rockville, Maryland. The store took off and eventually spawned many new stores, and over the course of years, they found themselves as one of the premiere toy retailers in the country. From the introduction of the store’s Mascot, Geoffrey the Giraffe, in 1973, it seemed like they were destined for greatness. If you grew up in the 70’s or 80’s, you wanted like nothing else to have a few hours to get lost in a Toys ‘R’ Us store.


Toys ‘R’ Us began to experience setbacks as early as the 1990’s, particularly when the influence of a competing chain, Wal-Mart, began to grow and eat into their profits. It provided a one-stop-shopping market that allowed people to get anything they needed – including all of the holiday season’s hot toys – in a single location. Similar brands continued to eat at Toys ‘R’ Us’ bottom line as well when Target piled on to take their corner of the market. Other, more storied, retail chains have also tried to join in on the success, such as Kmart, meeting with either lukewarm success, or in Kmart’s case, filing for bankruptcy in 2002. It was all enough to add to the woes of Toys ‘R’ Us as they pushed forward into the next century.


Skip ahead to the 2010’s and the cracks were already showing in many big box stores in the face of growing e-commerce juggernauts like Retail giant, Borders Books and Music collapsed in 2011, and many traditionally stable companies were starting to falter. Toys ‘R’ Us managed to accrue five billion in debt as they tried and failed to keep up with the online trend, only totaling ten percent of their revenue through an online store most consumers didn’t even think about. Why would they with the arrival of Amazon Prime and the allure of free shipping (plus not having to drag their children into a chain store)?


And things continue to change in 2017. The toy market may be growing, but brick and mortar stores are feeling more and more pressure from the internet. Online retailers, who don’t pay as much in terms of employees, rent, or general overhead, are crushing traditional retail models in what some are calling the ‘Retail Apocalypse.’ It’s the downside of progress – the things you used to love disappear. Sometimes they come back, like vinyl records seem to have. Most things tend to go the way of the eight-track, though.


Toys ‘R’ Us is certainly feeling the heat – in September of 2017, the retail giant officially filed for Bankruptcy, joining the ranks of other shopping mall anchors to feel the pinch such as JC Penney’s or Macy’s. Even smaller, non-anchor stores like Payless ShoeSource or RadioShack feel it. But, Toys ‘R’ Us? The place that brought joy to three generations of kids? Most people don’t even like the thought of it.


The owners of the chain, a group of real estate agents and investment partners (Vornado Realty Trust, Bain Capital Partners, and Kohlberg Kravis Roberts), have made assurances via their spokesperson, Dave Brandon, that “Toys’R’Us and Babies’R’Us brands [will] live on for many generations.” The Bankruptcy filing is such that their stores will remain open and their debt will be restructured, so much like many of its retail peers, the stores will not completely go away – but it’s likely there will be fewer of them, and that new directions will be introduced from their board to regain control of their brands and their fortunes.


What Can the Average Consumer Learn From Toys ‘R’ Us?


While Toys ‘R’ Us is very different from the average person on the street, you can take a lot of lessons from the retail giant’s turn of fortunes. There’s more in common with business Bankruptcy and personal Bankruptcy than you might think, and some of it is directly applicable.

Past Performance Is Not Always Predictive of Future Results


For Toys ‘R’ Us, the past was a glorious time. They grew, and grew until they lost sight of what was happening around them. They earned more revenue each year, enough to open many retail locations. They brought a lot of joy to a lot of kids. They got caught up in their success. But, the past is just that. It’s what happened yesterday, not what’s going on today. The things they’d learned and had come to value as successful strategies were no longer adequate. Times changed, and they kept making the same decisions, even when some board members were trying to right the ship. It’s easy to get complacent in that situation.


Consumers can’t afford to make those mistakes either. In a world where wages are stagnant, and cost of living is rising, consumers look to new models of consumption that don’t cost as much. But, financial hardship happens regardless sometimes. The leading causes of bankruptcy are largely surprise events. Unexpected debts can arise such as medical debt or runaway credit card spending when the chips are down. A divorce or job loss can destroy your ability to pay your debts on time. And then there’s what happened to Toys ‘R’ Us – bad budget habits. Acting like nothing is wrong when the above happens to you is a sure way to find yourself in financial difficulties.


Decisive Action is Paramount

When you identify the problem, you need to act quickly. While you may not have thousands of employees and a board to satisfy, you have things that are important to you riding on your financial solvency. Spouse, children, extended family, reputation, and financial security are all on the line. Sitting around waiting isn’t going to help any of them. You are unlikely to have a team of lawyers at your beck and call like Toys ‘R’ Us, but you can take swift action by seeking the assistance of an experienced Bankruptcy Attorney.


Understand That Bankruptcy Isn’t the End


You are likely to have a lot of negative connotations to go along with the idea of Bankruptcy – but remember, bankruptcy is meant as a way out from a bad situation. It’s possible to come out on the other side with some of your assets still intact and in your possession, just as Toys ‘R’ Us will continue to have most of its brick and mortar stores. There is life after Bankruptcy. You can still acquire a new home with a little help from the FHA, and there are ways to begin to slowly improve your credit after Bankruptcy.


Get The Advice You Need


You won’t have exactly the same options as Toys ‘R’ Us, but you have two analogs to their strategies: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Which version is right for you depends on your own unique circumstances, but Cibik & Cataldo, P.C. have thirty-five years of growing, adaptive experience with personal Bankruptcy laws that will assist you in finding the correct path forward to a brighter financial situation.


You can schedule a free consultation online, or call our offices directly at 215-735-1060.



By:Mike Cibik


Who Can File For Chapter 13 Bankruptcy?


If you’re in need of a Bankruptcy filing, then you’re probably looking at a lot of different options. There are several ways to move forward, but not all of them look particularly palatable at first glance. However, from the array of options you have, there’s one that might sound more appealing: Chapter 13 Bankruptcy. It doesn’t cause your property or assets to be liquidated in order to eliminate your debt like Chapter 7 Bankruptcy does, and it lets you restructure your applicable debts. Instead of losing all of your assets, you can keep most of what is yours while you work out a better way to pay for it. It may not be fun – but you won’t end up empty handed as long as you can make good on your new payment plan.


However, there’s much to learn about who can and can’t apply for Chapter 13 Bankruptcy, and there’s a lot of prerequisites – nine total. Let’s look through whether or not you’re qualified to file for Chapter 13 Bankruptcy one prerequisite at a time.


Private Citizens Only, Businesses Need Not Apply


The number one thing to know is that In order to file for Chapter 13 Bankruptcy, you need to be a private citizen. You cannot file on behalf of your business – the Bankruptcy filer must be an actual person. None of the debts covered by the Bankruptcy may be tied to a corporation, an LLC, or a non-profit, or other entity.


You Must Have a Job Capable of Repaying Your Debts


Those without some sort of income cannot file for Chapter 13 Bankruptcy. This means you have to have a stable job that’s capable of providing the kind of revenue you’ll need to pay back your debt after you’ve restructured under Chapter 13 Bankruptcy.


Mandatory Attendance for Credit Counseling


One hundred and eighty days prior to filing, you must seek out assistance via a credit counselor to come up with a plan for managing your debt. There are many established companies that can offer you credit counseling – some of which are even non-profit agencies that can take the sting out of their consultancy fees. Organizations that will counsel you on credit needs can give you certified documents to present in Bankruptcy Court to show that you’ve performed your due diligence before proceedings start.


Specific Secured and Unsecured Debt Limits Must Be Met


In order to file Chapter 13 Bankruptcy, you need to know how much debt you have, and whether those debts are secured debts or unsecured debts. Chapter 13 Bankruptcy allows for no more than $336,900 in unsecured debt (typically comprising of credit card or medical debt) and no more than $1,010,650 in secured debt (comprised of credit extended against collateral).


Have Your Complete Tax Records For the Last Four Years


You’ll need to show the court your tax records from the past four years to show that everything is in order and that you’ve no owed money to either state or federal governments. These types of debts cannot be discharged, and you’ll need to iron any tax debt out before you can proceed with filing for Bankruptcy.


You Must Not Be Barred By Previous Bankruptcies (Kind Of)


It’s not that you can’t have ever have had a Bankruptcy in order to meet this requirement, but you must be clear of any Chapter 7 Bankruptcies by two years, and be clear of any Chapter 13 Bankruptcies by four years. No exceptions.


Must Have No Recent Bankruptcy Dismissals


Much as with previous Bankruptcies, it’s not that you couldn’t have had a case dismissed before, but any dismissed cases must have occurred more than one hundred eighty days prior to filing in order to file again. There are no exceptions to this either and no appeals.


You Must Have a Plan to Repay All Remaining and Applicable Debts


In order to finally make the claim, you must have a repayment plan as drawn up either by your Credit Counselors or a Bankruptcy Attorney. Without a feasible way forward to pay off the debt, a filing will not be accepted.


Your Payment Plan Must Pay a Certain Amount of Unsecured Debt


The amount of unsecured debt you have to pay must meet a particular threshold. Debtors are responsible for repaying nonpriority, unsecured creditors at least an amount equal in value to their nonexempt property over the life of the repayment plan. Nonexempt property usually includes furniture and appliances for the home, lower-end jewelry, and an amount of equity in a vehicle or residence. This is probably the most complicated of the steps, but the folks assisting you with Credit Counseling should be able to assist you in sussing out the details.


That’s a Lot of Stuff to Do. How Do I Address All of This?


You’ll probably need a lot of help getting everything in order – not everyone is equipped to handle everything in a Chapter 13 Bankruptcy filing. But there are people who can help. Some of them will be lower cost, others less so. Three sources, in particular, will provide you with the most valuable assistance.


As noted before, there’s no getting around the Credit Counseling component when filing for Chapter 13 Bankruptcy, and there are many agencies to help you find a repayment plan that will pass muster in Bankruptcy Court. Additionally, these agencies can often assist you in putting your other financial needs in order, and assist you with strategies to repair your credit score post-filing, best practices for budgeting, and general financial education.


Additionally, it helps if you have an accountant who’s worked with you regularly. Services like H&R Block and Jackson Hewitt help millions of taxpayers sort through not just their yearly filing, but with requests for assistance with past claims (some fees may apply depending on your accountant or tax firm). If you’ve filed taxes yourself through systems like TurboTax, you have avenues to assist you with the tax components involved with Chapter 13 Bankruptcy. Both options should be able to retrieve tax records up to seven years past – possibly more depending on their retention policies. If you haven’t gone the accountant or TurboTax route, you’re still not out of options. There’s always the Internal Revenue Service to assist you with any claim going back seven years, albeit at the cost of $50 per filing requested.


Most importantly though, you’ll need a Bankruptcy Lawyer to help you with the intricacies of filing your Bankruptcy. Your case will be unique – every filing is – and each individual filer is guaranteed to find more than enough confusion along the way. So, don’t go it alone, trust the professionals. To learn more about your Bankruptcy options, reach out to Cibik & Cataldo, P.C. at (215)-735-1060, or visit our site to get a free consultation online!


We can guide you through a successful filing and put you back on the path to financial security. For 45 years, The Philadelphia, Pennsylvania debt-relief law firm of Cibik & Cataldo, P.C., has provided superior, cost-efficient, and value-oriented legal services with compassion and respect to thousands of clients in Philadelphia County and the surrounding areas of Montgomery County, Delaware County, Bucks County and Chester County.