Pennsylvania Bankruptcy Lawyers
Filing for bankruptcy can be a stressful, challenging time. Most people who file for bankruptcy have never done so before and are often unsure of what to expect, what to do, and what will happen to their debts, assets, and credit. But while bankruptcy may have a frightening reputation, filing for bankruptcy is actually a very proactive and responsible step toward financial recovery and the independence and freedom it brings.
Bankruptcy law can be complicated, but at Young Marr & Associates, you can rest assured you’re in good hands. With over 5,000 cases filed, our seasoned bankruptcy attorneys have over 20 years of experience to apply to your case. No matter how complicated, hopeless, or overwhelming your financial situation may seem, our Pennsylvania bankruptcy attorneys have been there before. We have decades of hands-on working knowledge of both Chapter 7 and Chapter 13 individual bankruptcies, and we are committed to walking our clients through every step of the process with compassion and respect, from initial filing all the way to final discharge. For a free legal consultation, call our attorneys today at (215) 701-6519.
Why File for Bankruptcy in Pennsylvania?
The world of bankruptcy is rife with negative myths and misconceptions. Sometimes, false ideas about bankruptcy even deter potential petitioners from filing. This is unfortunate because, for many people, bankruptcy is actually a powerful tool that offers many benefits and protections in addition to the relief from overwhelming debt. In many instances, bankruptcy can be more cost-effective than debt consolidation or debt settlement.
For consumers, there are primarily two basic categories of bankruptcy: Chapter 7 (liquidation) and Chapter 13 (reorganization). Both allow petitioners to discharge or eliminate a wide variety of debts. Depending upon which type of bankruptcy is more appropriate for a petitioner, they may be able to completely eliminate many debts, such as the following:
- Utility bills
- Medical bills
- Personal loans
- Business loans
- Credit card debt
No Taxes for Forgiven Debt
In addition to debt elimination, bankruptcy affords petitioners an additional tax benefit. Canceled or forgiven debt would usually be added to gross income when filing your federal income taxes. That means, for example, that $10,000 of debt forgiveness would require you to report an additional $10,000 of income, increasing the amount of federal taxes you owe. When you file for bankruptcy and get your debt eliminated, the discharged debt does not count as income and does not increase how much you have to pay in taxes.
Protection from Collectors
From the moment a petitioner files for bankruptcy, they are afforded the protection of an “automatic stay.” An automatic stay is a legal wall between the petitioner and their creditors that limits or stops the actions a creditor can take to collect a debt. When an automatic stay is in place, a creditor cannot call a petitioner or send them bills, and all legal proceedings, such as a lawsuit or sheriff sale, are stopped. In fact, next to debt elimination, invoking the power of an automatic stay is one of the chief reasons many individuals opt to file for bankruptcy. Advantages of an automatic stay include the following:
- An immediate stop to collection calls and letters
- Delays against service shut-offs for unpaid utility bills
- Delays against eviction and foreclosure
One of the most persistent and pernicious myths about bankruptcy is that it destroys a petitioner’s credit permanently, and it will never again be possible to purchase a house or car or take out a loan. While it is true that a bankruptcy remains visible on a petitioner’s financial record for a set period of time before disappearing, eliminating outstanding bills and debts through bankruptcy gives petitioners the opportunity to begin again on a level playing field. Once a bankruptcy has been successfully discharged, making timely bill and credit card payments can restore good, healthy credit.
Peace of Mind
Peace of mind may not be quantifiable like debt discharge or credit repair, but for many petitioners, it’s one of the most valuable aspects of filing for bankruptcy. The constant harassment from creditors and worries about the future can often lead debtors to suffer from stress, depression, and anxiety. With the support of a consumer bankruptcy attorney on your side, you can banish creditors and regain the confidence that you are empowered to take control of your finances, your future, and your life.
Which Type of Bankruptcy is Right for You?
The idea of filing for bankruptcy is formidable. During your initial consultation, our seasoned attorney will work to ease any anxiety you may be feeling. Through a series of questions, we will be able to evaluate your financial situation and propose workable options to achieve your goals. Our objective is for you to be comfortable and understand the bankruptcy process, including the benefits and advantages of Chapter 7 and Chapter 13 bankruptcies.
Generally, Chapter 7 bankruptcy is for individuals with limited income, mostly unsecured debt, and without substantial assets, filing for Chapter 7 would be useful. Commonly referred to as “liquidation” bankruptcy, Chapter 7 is a relatively short proceeding allowing a debtor to eliminate a vast majority of their debt.
Chapter 13 bankruptcy is for individuals with substantially more income or who are filing to pay specific types of debt, such as mortgage arrears or back taxes. During our initial consultation, we will determine if filing for Chapter 13 satisfies your needs and helps you achieve your financial goals.
The heart of a Chapter 13 bankruptcy is the reorganization plan. The terms of your plan must adhere to several code provisions and address your debt.
Most debtors will file for Chapter 13 to address a specific debt. For example, filing for bankruptcy to pay overdue real estate taxes. In this example, a debtor must pay the tax delinquency over 36 to 60 months. The proposed plan would indicate the monthly amount a debtor would pay to a court-appointed trustee to satisfy their real estate tax debt.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, which is also called “ordinary bankruptcy,” “straight bankruptcy,” or “liquidation bankruptcy,” is the most common type of bankruptcy case. According to statistics, Chapter 7 accounts for approximately two thirds of all consumer bankruptcy filings.
Chapter 7 allows the person filing, who is called the “debtor,” to discharge unsecured debts, or debts that are not secured by collateral. This includes debts from credit card bills, medical bills, utility bills, and most personal loans.
If you file for Chapter 7, you may be able to keep your car, your home, and other possessions by using bankruptcy exemptions. Debtors in Pennsylvania may choose between federal exemptions and state exemptions, which can protect certain assets depending on your amount of equity in those items. While most debtors choose the federal exemptions, which provide a greater level of asset protection, there are some cases where it is appropriate for debtors to use the Pennsylvania exemptions.
A court-appointed official called the “trustee,” who is assigned to each Chapter 7 case, has the authority to sell the debtor’s non-exempt assets and distribute the proceeds to the debtor’s creditors. However, in the majority of cases, exemptions can protect most or all of the debtor’s property.
Chapter 7 bankruptcy can have a few advantages for debtors. Not only is the Chapter 7 process faster than other types of bankruptcy, there is also no requirement to make monthly payments to a bankruptcy trustee. The process can also provide swift and significant debt relief, allowing for a fresh start.
A Chapter 7 Bankruptcy May be Appropriate for You Under the Following Circumstances:
- You have primarily unsecured consumer debts.
- You have either limited equity in your home, you are a renter, or your home is owned as husband and wife and the unsecured debt is primarily in only one party’s name.
- You have a moderate or modest income.
- You have little or no money left after paying your necessary living expenses.
- You do not have significant liquid assets.
There are many advantages to a Chapter 7 bankruptcy as compared to other types of bankruptcy. In a Chapter 7, there are no monthly payments to be made. In addition, a Chapter 7 bankruptcy is less costly than a Chapter 13 bankruptcy, and you will receive a Chapter 7 discharge at the end of the process which only takes approximately three to five months from the filing date. Also, if you decide to file a Chapter 7 bankruptcy, you will in most cases immediately stop making payments to all unsecured creditors and will be under the protection of the bankruptcy law. The filing of a bankruptcy, whether it is a Chapter 7, 11 or 13, produces an Automatic Stay which immediately stops all action on the part of creditors. Even though there were significant changes in the bankruptcy laws effective October 17, 2005, most individuals who would have considered filing a Chapter 7 bankruptcy under the old law would still qualify under the post-October 17, 2005 changes.
Chapter 7 Bankruptcy Income Requirements and Levels in Pennsylvania
It’s based on the median incomes for the states. So, there’s a presumption if you’re above a certain income that you don’t qualify for Chapter 7, but that’s not absolute because they do give credits for certain things, such as mortgage payments for child support. So, for example, a household of one in Pennsylvania, your approximate income is up to $45,000 to still qualify for a Chapter 7.
For example, a family of four in Pennsylvania, the median income allowed is a little over 80,000. Again, you can still qualify, potentially, for Chapter 7 with incomes above those levels, if you have certain credits, which you’re entitled to, such as a car payment or child support or a mortgage payment.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy permits individuals to keep all of their property while making a monthly payment to creditors out of their future earnings or income. A repayment plan, also known as a Chapter 13 Plan, must be approved by the Court. In most cases, a majority of unsecured debt is discharged, and payments are made on arrearages on secured loans such as mortgages, car loans, or tax debts. A written Plan is created providing anywhere from 36 to 60 months payments to the Trustee who then distributes the payment to creditors per the Plan. At the end of the Plan, you will receive a discharge from the Bankruptcy Court. Unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy is ideal for any individual who is behind on secured payments and is unable to bring the accounts current without the filing of the petition. Unlike attempting to negotiate with a secured creditor outside of bankruptcy, the Chapter 13 Plan forces the creditor to accept payment on the arrearages over either a 36 or 60 month period of time. A Chapter 13 bankruptcy may also be appropriate in a case where your monthly income is significantly in excess of your monthly living expenses (excluding payments to unsecured creditors such as credit card payments). Like a Chapter 7 bankruptcy, a Chapter 13 provides an automatic stay which will prevent all creditors from taking any further action once the case has been filed. Likewise, if you file a Chapter 13 bankruptcy, pursuant to the Automatic Stay, all creditors will cease communication with you.
A Chapter 13 Bankruptcy May Benefit You Under the Following Circumstances:
You are behind on your payments for property that you want to keep in a bankruptcy.
For example, you are behind on your mortgage or car payments. In this instance, the arrearages may be put in the Plan so your original payment amount will stay the same. In certain circumstances, you may place your whole loan in the Plan and reduce the total amount repaid on a car loan. This is known as a ‘cramdown’, which is based upon a number of factors including the value of your car.
If you have tax debts that are not dischargeable in a bankruptcy.
Under limited circumstances, certain federal and state income taxes may be able to be discharged in a bankruptcy. However, in most cases, federal and state income taxes may need to be repaid, and a Chapter 13 allows you to repay the taxes over a 36 or 60 month period. In addition, most, if not all, of the penalty will be forgiven under the Plan.
If you have significant credit card unsecured debt, such as credit cards or medical bills but your income is too high to qualify for a Chapter 7 bankruptcy.
In that instance, often a Chapter 13 Plan will provide relief in that it will significantly reduce your payment to unsecured creditors.
If you have non-exempt property that you want to keep.
If, for example, the value of your home is significantly more than what your remaining mortgage or home equity loans total, or you have a significant amount of liquid assets, you would have to give up that property if you filed a Chapter 7 bankruptcy. However, in a Chapter 13 bankruptcy, you would be able to keep the property and pay back those unsecured creditors who filed Proof of Claims in the bankruptcy over a 36 to 60 month period, interest and penalty free. Remember, like a Chapter 7, a Chapter 3 bankruptcy will stop all mortgage foreclosure actions, utility shut-offs and any law suits or other legal action on the part of any creditors.
Remember, it is important to speak with a qualified professional prior to determining whether a Chapter 7 or a Chapter 13 bankruptcy is appropriate for you. At Young, Marr, Mallis & Associates, no legal advice will be given except by a qualified bankruptcy attorney who can best assess your situation and determine the appropriate remedies available. You can contact one of our experienced attorneys to discuss whether a Chapter 7 or a Chapter 13 bankruptcy is right for you. This is a free consultation and legal advice will only be given by one of our experienced bankruptcy attorneys.
Using Chapter 13 Bankruptcy to Stop a House Foreclosure in Pennsylvania
It is not uncommon for someone to fall behind on their mortgage payments. A medical condition, the loss of a job or income, or an unforeseen economic hardship can strain limited financial resources. A mortgage company may demand the full amount due if a person falls behind a couple of months. Once the foreclosure process begins, the delinquency increases due to additional attorney fees and other charges. Eventually, a homeowner could lose their property in a sheriff sale.
Chapter 13 can help a petitioner facing a foreclosure. Once a foreclosure proceeding begins, the mortgage company will require payment of the full amount the homeowner is behind. If payment is not possible, the house will be auctioned at sheriff sale. Through Chapter 13, a petition can halt the foreclosure proceedings and stop any scheduled sheriff sale. The petitioner will be afforded the opportunity to begin monthly mortgage payments directly to the mortgage company while paying the delinquency through the Chapter 13 bankruptcy plan.
Short Sales and Loan Modifications
If you’re a homeowner in Pennsylvania who is considering bankruptcy due to financial hardships, it may be appropriate to explore loan modifications, which can make it easier for you to manage your monthly payments. It may also be beneficial to consider a short sale, which may be able to stop foreclosure of your home.
A short sale may be the best approach for a homeowner who owes more than his or her property is worth. In a short sale, the borrower or “mortgagor” sells his or her property for less than the actual mortgage amount. However, the short sale must be authorized by the lender or “mortgagee” in order to proceed successfully, which can create obstacles for homeowners who lack legal representation. An experienced bankruptcy attorney can work to negotiate a short sale for you, and will protect your best interests and legal rights as a homeowner throughout the process.
Loan modifications, such as mortgage loan modifications, can also be helpful for homeowners who are experiencing financial difficulties. Depending on the situation and what the lender is willing to agree to, a mortgage modification can make your mortgage more affordable by lowering interest rates or extending the duration of the loan, resulting in smaller payments.
Tax Issues During Bankruptcy in Pennsylvania
Paying local, state, and federal taxes is a necessity. Outstanding tax obligations can incur increasingly higher interest payments and penalties, creating a substantial financial burden. Bankruptcy can help provide some relief.
Overdue tax obligations can be paid through Chapter 13. A proof of claim filed by a taxing authority will split the debt owed into different categories. The priority portion of the claim, usually the principal amount the petitioner owes, must be paid in the bankruptcy. A part of the amount due may be classified as entirely unsecured and dischargeable.
In some instances, taxes may be completely dischargeable under bankruptcy. However, the petitioner must meet specific criteria: the debt must be income tax debt, the petitioner must have filed a legitimate tax return two years before filing bankruptcy, and the IRS must have assessed the tax return at least 240 days before the filing date of the bankruptcy.
Call Our Bankruptcy Lawyers in Pennsylvania for a Free Legal Consultation
If you or a loved one is considering filing for bankruptcy in Pennsylvania, contact Young Marr & Associates by calling (215) 701-6519 to speak with an attorney. Our consultations are completely confidential, and your initial consultation comes at no charge. For decades, we have provided aggressive, affordable bankruptcy representation to clients throughout Pennsylvania, and we can do the same for you. Get back on the path to financial success today with Young Marr & Associates.