Bankruptcy Basics

Pennsylvania Bankruptcy Basics

Deciding to file for bankruptcy in the Commonwealth of Pennsylvania, or anywhere else, is not easy. For most of those who file use this as a last resort to remedy their financial-unsustainable situation. Rules and procedures can be very complex, and therefore, it is best to hire an experienced bankruptcy attorney who is familiar with the local rules Bankruptcy Courts in Philadelphia.

All petitions for bankruptcy are filed in Federal Bankruptcy Court. The Philadelphia based business or Philadelphia resident filing is considered the “debtor” in a bankruptcy case. Therefore, if you are the one petitioning for Bankruptcy, you will be referred to as the “debtor.” The “creditors” are those whom the debtor owes money. The petition is usually filed in the state in which the Bankruptcy Court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets.

It is imperative to meet with an attorney before filing any petition for bankruptcy. A Philadelphia resident thinking about filing for bankruptcy could need significant time to gather all necessary paperwork together. This includes documentation of assets, liabilities and recent gifts or money transfers. A complete list of information that the client should obtain for the first meeting will be provided by the attorney.

During the first meeting between client and attorney, the fees and costs for filing a bankruptcy petition and the timeline for the specific case type being filed, will be discussed. Additional information may be requested by the attorney based on his or her discoveries during the initial meeting with the client. This additional information may be regarding the client’s assets and whom money is owed.

After the client meeting with the attorney, the attorney will prepare all the required forms and schedules. After the attorney files for the bankruptcy petition with the court in Pennsylvania, the client will immediately receive protection against having his wages garnished. They will also be protected from the constant harassment of over-zealous “bill collectors”.

The creditor harassment and threatening letters and 24-hour phone calls must stop right away. This will allow the client to have confidence in the process and know the case is in the capable hands of the attorney. It is possible for there to be an obligation for a client to appear in person in the court sometime after the case has been filed.

There ate several types of bankruptcy filings authorized under the U.S. Bankruptcy Code. Depending on whom the debtor is-an individual, a municipality, a corporation or partnership will be how the attorney will decide which Chapter (U.S. Code Section) to file your particular case. The decision will also depend on specific circumstances related to the debtor’s situation.

There are different ways to pay creditors the money they are owed, which is outlined in each Chapter of the law. Each situation is different. Sometimes, the debtor’s property is liquidated or sold. Then the sale proceeds are distributed to the creditors, pro rata, or as a percentage of the total dollar amount owed to each one individually.

In other situations, the debtor may be allowed to “reorganize”. Rather than liquidating all of the assets and shutting its doors, it’s possible a business can make what is akin to a payment-arrangement contract. This would be because the business could potentially turn itself around, remain viable, run efficiently going forward and generate a profit.

Like a business, an individual has an option under the bankruptcy laws to make a similar type of payment arrangement their creditors. The individual’s payment agreement terms may require payment within a three to five year period. Also needed, will be documentation that the individual has a history of employment generating sufficient salary to make the payments.

Depending on state law, certain debts are not exempt from bankruptcy and must be paid. Debts that will continue to remain the debtor’s responsibility include home mortgages, alimony and child support, some taxes and student loans, debts owed to someone injured or killed by the debtor while intoxicated or under the influence of drugs and court-ordered restitution to a crime victim. Other debts will come to be dischargeable after the bankruptcy proceeding has been completed. Procedures regarding unclaimed funds will also be cleared up by Bankruptcy.

Partnership and corporate debtors may ask whether it is really necessary for them to hire an attorney. Corporations and partnerships must retain an attorney in order to file a bankruptcy case, pursuant to federal regulations. Individuals, however, are permitted to represent themselves without a bankruptcy attorney in bankruptcy court, but this is not advised as it is extremely difficult to represent oneself in federal court successfully. In fact, the Court strongly recommend that individuals file for bankruptcy with the aid of an attorney. Therefore, immediately consulting with a bankruptcy specialty lawyer is extremely wise. As with any type of litigation, it is very important that the case be filed correctly at the outset and proper procedures are followed throughout the remainder of the bankruptcy case.

Rules and regulations regarding Litigation in the federal courts, including Bankruptcy Courts, vary by district. They are technical and often confusing for non-lawyers. An individual may risk being held in contempt of court or cause the case to be dismissed, even if only one innocent mistake is made. Each debtor, judge, clerk and attorney must follow the bankruptcy procedure exactly.

It is extremely important the client is honest in all disclosures to the attorney and to the court. Upon discovery of fraud or deceit, the bankruptcy petition will very likely be denied by the judge. Various methods and schemes people use to hide property and money are well recognized by the court because they have seen a lot of this in the past.

In addition, the court has an auditing system set up to detect fraudulent filings in records already in place. A debtor could also be criminally charged if a fraud is discovered. Bankruptcy Fraud is a serious, federal crime.

Upon the completion of the case, it is imperative the debtor comply with the terms set forth in any sanction, settlement agreement or court order. The judge can reopen the case if even one payment to a creditor is late or missed.

To learn more about your options for debt relief in Philadelphia, Pennsylvania please contact the Philadelphia bankruptcy attorneys at Jensen Bagnato, P.C. They possess a wealth of experience and offer free consultations to those in need of financial relief in the Philadelphia area.