Are you struggling to manage debt from credit cards, medical bills, personal or business loans? Maybe you’ve fallen behind on your mortgage or student loan payments and need to work out a plan to catch up over time. Need a financial fresh start? If so, the filing for bankruptcy may be a solution to your financial problems. In addition to eliminating many of your debts, a bankruptcy can also stop the collection calls, temporarily freeze a mortgage foreclosure and halt debt collection lawsuits. A bankruptcy can put you in a financial position where you will be better able rebuild your good credit for the future.
Bankruptcy can be a complex process, and the average person probably isn’t equipped to go through it alone. Working with a bankruptcy attorney can help ensure your bankruptcy goes as smoothly as possible and complies with all the applicable rules and regulations governing bankruptcy proceedings.
Our attorneys have successfully handled many Chapter 7 and 13 bankruptcies across Pennsylvania. Our attorneys are ready to evaluate your situation and help you decide whether a bankruptcy is the right decision for you.
TWO TYPES OF CONSUMER BANKRUPTCY CASES
Most people filing bankruptcy will want to file under either Chapter 7 or Chapter 13. Either type of case may be filed individually or by a married couple filing jointly. Chapter 7: is known as “straight” bankruptcy or “liquidation”. It requires an individual to give up property that is not otherwise ”exempt” under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep all their property except property that is very valuable or that is subject to a lien they cannot avoid or afford to pay. Chapter 13: is a type of “reorganization” used by individuals to pay all or a portion of their debts over a period of 3-5 years using their current income.
Consumer Bankruptcy (Chapter 7)
Chapter 7 is often called a “straight bankruptcy.” You ask the court to discharge your debts in exchange for giving up your property except for “exempt” property which the law allows you to keep. In most cases, all your property will be exempt and not be affected by your bankruptcy case. You can protect equity in your home, some cash in checking or savings accounts, a motor vehicle, retirement accounts, jewelry and many household belongings. Property that is not exempt is sold, with the money distributed to your creditors.
If you want to keep property that you cannot exempt, like a home with significant equity or a car and you are behind on the mortgage or car loan payments, a Chapter 7 case may not be the right choice for you. That is because Chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt. Additionally, if your income is above a certain level defined by law, you may be required to file a Chapter 13 case.
Married couples can file together but are not required to do so. If filing as a couple you double your ability to protect your assets. About sixty percent (60%) of all bankruptcy cases that are filed are Chapter 7 cases.
Consumer Reorganization (Chapter 13)
A Chapter 13 bankruptcy is like a reorganization of your financial life. In a Chapter 13 case you file a “plan” showing how you will pay off some portion of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it allows you to keep valuable property – especially your home and car – if you can make the payments set forth in your plan. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind. You should consider filing a chapter 13 plan if you: 1) own your home and are in danger of losing it because you’ve fallen behind on mortgage payments; 2) are behind on car payments, but can catch up if given some time; or 3) have valuable property that does not qualify for an exemption under bankruptcy law, but you can afford to pay creditors from your income over time.
Considering Bankruptcy and Have Questions? Here Are Some Answers: