King of Prussia, PA Bankruptcy Lawyer
Overwhelming debt can make daily life a nightmare. When you are constantly worried about how you’re going to catch up on your bills or talk to aggressive creditors, it can be impossible just to get a good night’s sleep. If you need help tackling your debts and getting a fresh financial start, filing for bankruptcy may be the right option. You can eliminate your debts, put a temporary stop to collection attempts, and build a platform for good credit going into the future.
However, it’s extremely important to consult with an experienced attorney. The process of filing is notoriously complex, and even a minor error on your paperwork could compromise your case. Do not go it alone: get legal support from the King of Prussia bankruptcy lawyers of Young, Marr, Mallis & Associates. We have more than two decades of experience handling thousands of cases and offer free initial consultations to new clients. To set up your free, confidential case evaluation, call our law offices today at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania.
King of Prussia Bankruptcy Requirements
Before you file for Chapter 7 or Chapter 13, you need to meet a few basic requirements.
First, you need to meet the residency requirement. The residency requirements which apply to you depend on which set of exemptions you plan on using: the federal exemptions, or the Pennsylvania state exemptions. In simple terms, “exemptions” allow you to keep certain assets and property. If your property is exempt, it cannot be sold by the Chapter 7 trustee. For example, the federal exemptions provide a “wildcard” exemption. This exemption is currently $1,325 and can include an additional $12,575 of any unused homestead exemption. By comparison, the Pennsylvania wildcard exemption is only $300.
To use the federal exemptions, King of Prussia residents must live in Pennsylvania for at least 91 out of the 180 days before filing. If you wish to use the Pennsylvania exemptions instead, you must be a resident for at least two years before you file your petition. Our King of Prussia bankruptcy attorneys will talk you through your exemption options to help you make financially advantageous legal decisions.
In addition to the residency requirement, you will also have to go through credit counseling, which must be administered by an agency that has been approved by the Department of Justice. The objective of credit counseling is to determine whether there are other ways for you to improve your financial situation.
Benefits of Filing for Bankruptcy in King of Prussia
People facing overwhelming debt often turn to other options besides bankruptcy, including consolidation loans, debt relief companies, or borrowing money from friends and family members. While each one might provide some relief to your financial woes, none offers the protections or provides the benefits available in bankruptcy.
The most common reason anyone files for bankruptcy is that they are facing overwhelming debt. A debtor can discharge, or eliminate, a significant amount of their debt by filing for bankruptcy. Typically, this includes credit card debt, medical bills, personal loans, some tax liabilities, utility bills, and other unsecured debts. Unfortunately, not every kind of debt is dischargeable. Debtors are not permitted to eliminate child support obligations, back alimony, criminal restitution, specific taxes, and most student loans. You should speak with our experienced King of Prussia bankruptcy attorney to review your debt.
It is essential to understand the difference between discharging debt through bankruptcy and having your debt forgiven by a creditor. When a creditor forgives your debt, it is considered income for tax purposes. For example, if you owe $35,000 in medical bills and that debt is forgiven, you will have to claim the amount as income on your tax returns. This additional income could result in losing your tax refund or owing money to the government for the tax year. When debt is discharged through bankruptcy, there is no tax consequence. Therefore, there is a significant advantage if you are discharging a substantial amount of debt through a bankruptcy as opposed to having it forgiven.
Perhaps the most powerful tool in bankruptcy is a legal injunction called an automatic stay. This stay is a legal wall between you and all your creditors. The moment you file for bankruptcy, your creditors are prohibited from taking any action to collect on the debts you owe. The prohibition includes phone calls, emails, letters, and any legal proceedings.
If your home is in foreclosure or if a sheriff sale is scheduled, a bankruptcy will stop the court action or the sale. While our office does not recommend waiting, you could stop a sheriff sale on the morning it is scheduled. Additionally, filing for bankruptcy will stop the repossession of your vehicle if you have fallen behind in your payments. In cases where a car was already repossessed, you could force the lender to return the vehicle if you file a timely bankruptcy. Do not hesitate to call our office if your car was taken.
If you are trying to settle your debt by working directly with a creditor or going through a credit relief company, there is no prohibition from continuing a collection lawsuit. In Pennsylvania, if a creditor prevails in a lawsuit against you, you not only have a monetary judgment against you – you have a judgment lien on your property. A judgment lien means that your home now secures your once unsecured debt. A judgment lien could be a problem when you sell your home or attempt to refinance an existing mortgage.
By filing for bankruptcy, you can stop a creditor from getting a lien on your property. Additionally, under certain circumstances, you can have a judgment lien removed from your home. However, this is not possible in every case, so it is better to stop the process before a judgment is entered.
Creditors in Pennsylvania and King of Prussia are also permitted to freeze your bank accounts if they have a judgment against you. By filing for bankruptcy, you can prevent this action or unfreeze your account. Our King of Prussia bankruptcy lawyers will review your unique situation and discuss the benefits of your automatic stay.
Paying, Lowering, or Eliminating Secured Debt in King of Prussia
Secured debt is debt that is attached to your property. Many people have a mortgage or a car loan, both of which are secured. If you fall behind in a secured payment, the lender has the right to take back the property. As stated above, filing for bankruptcy will stop a repossession or a foreclosure. More importantly, filing for bankruptcy forces the lender to agree to a five-year payment plan to pay back what you are behind. This payment is interest-free and usually more manageable than one or two lump-sum payments. By filing for bankruptcy, you can keep your home or car.
In most cases, you are not permitted to change the terms of a secured loan. However, there are two exceptions in bankruptcy that could lower or eliminate a secured debt.
If you have a car loan, you could owe more than your car is worth. If you purchased your vehicle more than 910 days before filing for bankruptcy, you might be able to lower the amount you owe. For example, if your car is only worth $5,000 and the remaining balance of your loan is $10,000, you could potentially cramdown your loan to the fair market value of your vehicle. When you meet with our King of Prussia bankruptcy attorney, they will determine if you could take advantage of this benefit.
It is not uncommon for a homeowner to have a second mortgage. In some unfortunate cases, the value of a home might have depreciated to the point where you owe more on your first mortgage than the property is worth. If this is the case, and you have a second mortgage, you could potentially eliminate the second mortgage through bankruptcy. By converting your second mortgage to an unsecured and dischargeable debt, you could save money on your monthly expenses and freeing your property from an additional lien. This advantage is only available to a debtor filing for Chapter 13.
Chapter 7 and Chapter 13 Bankruptcies in King of Prussia
It is not uncommon to hear about businesses filing for Chapter 11. Individuals also file under “chapters,” most commonly Chapter 7 (“liquidation”) and Chapter 13 (“reorganization”).
You will have to take the Means Test to determine which chapter is right for you. The Means Test compares your income to the median income for a Pennsylvania household of equivalent size. If your income is less than the median, you qualify for Chapter 7 but you still might want to file under Chapter 13 in certain situations. If your income exceeds the median, you must file for Chapter 13 unless you can prove to the judge that your expenses are high enough to qualify you for Chapter 7.
This is because Chapter 13 is contingent on a long-term, three- to five-year repayment plan, which gives Chapter 13 its nickname of reorganization. Chapter 7, which is meant for filers with a greater degree of financial need, does not include a repayment plan. As a result, Chapter 7 is much faster than Chapter 13, often concluding in as little as four to six months.
However, the other consequence is that Chapter 7 filers may not be able to keep as much property as individuals who file under Chapter 13. The trustee assigned to your Chapter 7 case may sell your non-exempt property to creditors to help repay your debts, which is why Chapter 7 is sometimes referred to as liquidation.
Both chapters have strengths and weaknesses. Neither is objectively better than the other; it simply depends on what sort of financial background you are coming from, and which goals you’re trying to achieve by filing.
Our King of Prussia, PA Bankruptcy Lawyers Can Help
Bankruptcy was designed to help people and businesses through their financial difficulties. It is not meant to punish. If you or a loved one are facing economic hardship, foreclosure, or are just overwhelmed by credit card debt, contact our compassionate bankruptcy attorney to review your options. Many people feel a tremendous weight off their shoulders once they understand what bankruptcy is. Call the law offices of Young, Marr, Mallis & Associates at (609) 755-3115 in New Jersey or (215) 701-6519 to schedule a free consultation.