Bankruptcy was designed to protect consumers no longer able to make payments on their debt, as well as the creditors to whom they owe money. Pennsylvania lawyers who practice bankruptcy law on a regular basis can help you file a bankruptcy petition, but how do you know when things have spiraled so out of control that bankruptcy is your only viable financial option? Here are a few clues to look for:
- You are paying only minimum amounts on your credit cards and other loans;
- You have used up all your home equity in order to pay off bills not related to home improvements;
- You have no savings or emergency funds to rely on in case of emergencies;
- You are under-insured–or have no insurance at all;
- You are receiving threats of foreclosure or repossession;
- You are living from paycheck to paycheck with barely enough to cover basic necessities.
Pennsylvania lawyers can help consumers file for bankruptcy under either Chapter 7, which allows all debt to be wiped out except for a few exceptions, or Chapter 13, under which consumers set up a repayment plan to pay back debts over several years’ time.
Chapter 7 is often referred to by Pennsylvania lawyers as liquidation. Usually the simplest and quickest form of bankruptcy, it is an option for individuals, married couples, corporations and partnerships. The court appoints a trustee who then collects and sells all non-exempt assets in order to use the proceeds for payment of debt. Pennsylvania residents who make less than the median income for families in Pennsylvania, based on Census Bureau statistics, will qualify for Chapter 7 bankruptcy. For those making more than the median income for families in Pennsylvania, their income for the past six months will be considered, together with mortgage and car payments, back taxes and overdue child support, and school expenses of up to $1,650 per year.
If, after deducting these amounts along with the living expenses provided in the Internal Revenue Service’s national collection standards, you can still pay at least $6,000 ($100/month) to unsecured creditors over five years, you’re not going to qualify for Chapter 7 bankruptcy. Your only other option would then be to consult with Pennsylvania lawyers to see about filing for Chapter 13 bankruptcy. Keep in mind that you must show you have obtained approved credit counseling before you can file for bankruptcy.
Individuals or sole proprietors who do not qualify for Chapter 7 bankruptcy can file for Chapter 13 bankruptcy, which gives consumers the opportunity to pay off all or part of their debts over three to five years. Rather than liquidating assets, this option lets debtors reorganize their debts so they can afford to make all their monthly payments. It’s a good idea to research Pennsylvania lawyers experienced in practicing bankruptcy law to find the right fit to represent you.
In order to have success with a Chapter 13 bankruptcy, you should have a steady paycheck coming in, with income left over after paying for the necessities of life such as food, shelter, and utilities. Debtors must have no more than $1,010,650 in secured debt, which means there is some sort of collateral such as property or automobiles that creditors can take back, and $336,900 in unsecured debt, including conventional credit cards. Many Pennsylvania lawyers are savvy in the ins and outs of filing for bankruptcy in this state.
Those filing for Chapter 13 bankruptcy must include a proposed payment plan set out over three to five years, something that Pennsylvania lawyers have the know-how to prepare. The proposed payment plan must provide for the complete payment of all “priority claims,” such as taxes. The court-appointed trustee will review the proposed plan for accuracy and feasibility. Creditors will then receive the plan for review and have the right to object to the plan if they believe it is unreasonable. If your plan is approved, you can keep all your assets during the three to five year period. You will make monthly payments to the trustee, who then distributes all funds to the creditors according to the plan. Once you complete the approved plan, your unpaid debts will be considered “discharged.” However, failure to complete the repayment plan as approved means you should consult experienced an Pennsylvania lawyer who practice bankruptcy law to find out your available options.