Pennsylvania Bankruptcy Laws
The word bankruptcy can be scary for Philadelphia residents who are barely making ends meet. Merely considering filing bankruptcy can evoke many unpleasant thoughts and emotions such as failure, guilt and shame. In reality, many people do not have a good idea of what it actually is and what it entails. The only thing they may know is that it can prevent them from making purchases in the future and that it can haunt them for years after the filing is finalized. So, what exactly is bankruptcy?
Chapter 7 bankruptcy is sometimes referred to as a liquidation bankruptcy. It is referred to as this because some of the assets a person owns may be sold, or liquidated, to repay some of the debts that they open. There are certain properties, however, that are exempt under state law, but a person should clearly understand what these protective properties are so that they do not face an unpleasant surprise once they are ready to file. Some of the property that is considered exempt includes things like household furnishings, and automobile, clothes, and other personal items that debtors cannot use to repay the debts that a person owes.
When it comes to secured debts that a person has going into a Chapter 7 bankruptcy, they often have a choice of options available to them. If, for example, an individual has a car loan they can either choose to allow the creditor to repossess the automobile, keep making payments under the existing contract, or they may be able to simply pay a lump sum to the creditor and keep the property. Of course, it will be necessary for the lender to agree to the terms.
Most people are able to qualify for a Chapter 7 bankruptcy. but there are always exceptions. An example of an individual that would not qualify would be if the person had enough income at their disposal to qualify for a repayment plan under Chapter 13. It’s also important to bear in mind that bankruptcy does not wipe out every type of debt out there. While things like unsecured loans, credit card debt, and medical bills can be covered by a Chapter 7 bankruptcy, things like student loans, spousal support, tax debts (federal and state), as well as child support arrears cannot be rolled into the Chapter 13 plan according to federal as well as Pennsylvania bankruptcy law.
Chapter 13 bankruptcy is a repayment plan that allows an individual to pay back their debts over the course of 3 to 5 years. How much a person has to repay will be dependent on the amount of money that they earn, the amount of money that they owe, and the amount of money that creditors would have gotten if the person had filed instead for Chapter 7 bankruptcy.
The federal government has set certain debt limits. A person cannot have more than $1,149,525 in secured debt or more than $383,175 in unsecured debt.
Individuals who have a number of secured debt may find that the fact that they can make up any missed payments so that they can avoid something like a foreclosure or repossession. In this case, considerations such as this make Chapter 13 a good option for some. These past missed payments can be included in the repayment plan, which allows a person to make up for them over an extended period of time.
It is important to note that in a Chapter 13 not only do you have to show enough income to be able to adhere to the repayment plan but you also have to resume payments on assets and properties you are keeping upon filing Chapter 13 bankruptcy. Qualifying is something that an experienced Philadelphia bankruptcy attorney will help you with via the bankruptcy means test.
There other types of bankruptcies including Chapter 11 and Chapter 12. Chapter 11 bankruptcy is the one used by businesses that are struggling financially who are looking for an option to help them reorganize. Individuals may also be able to use Chapter 11, but they generally don’t because of the fact that it is quite time-consuming and very expensive.
Chapter 12 bankruptcy is very similar to chapter 13, but is only available to individuals for whom 80% of the debts they have come from operating a family farm.
How A Philadelphia Bankruptcy Attorney Can Help You
Whether or not to actually file for bankruptcy is a decision that a person must carefully weigh. While it may provide some relief by allowing them the opportunity to get out from under crushing debt, it can also haunt their credit for a number of years. Individuals may find that it is quite difficult to qualify for an auto loan, a credit card, or a mortgage.
Not everyone will qualify for bankruptcy and not everyone actually wants to go through that once they learned little bit more about the terms and conditions that are placed upon them. For example, if an individual’s debts are mostly from the types of debts that are protected from bankers to filings, such as student loans or alimony payments, they may find that filing for bankruptcy really provides them no relief whatsoever. There are also other options available to individuals that are looking to get their debt under control without having to actually go through a bankruptcy filing. Repayment plans or debt consolidation are both options a person should seriously consider before making their final decision.
Lastly, it is also very important to remember that filing for bankruptcy is not something that is free. An individual may find that they simply cannot keep up with their regular monthly bills so they turn to bankruptcy only to find that the filing fees add an extra expense that they may not be able to afford. Since most bankruptcy attorneys will not accept any type of payment plan, preferring instead to get paid up front before the filing actually occurs, a person will need to know exactly how much it is going to cost for them to start getting out from under the debt that is causing them so much anxiety and stress.
If you are barely treading water financially in the Philadelphia area do not hesitate to contact Philadelphia Bankruptcy Lawyer Matt Lazarus at The Law Office of Erik B. Jensen today to discuss your options.
“We are a debt relief agency. We help people file for relief under the U.S. Bankruptcy Code.”
Learn more about Bankruptcy at our Bankruptcy Basics Page: