King of Prussia, PA Bankruptcy Lawyer
Overwhelming debt can make daily life a nightmare. When you are constantly worried about how you are 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 is 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.
Our bankruptcy attorneys at Young, Marr, Mallis & Deane are here to provide you with a free review of your case by calling us today at (215) 701-6519.
King of Prussia, PA 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 that 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. Fortunately, our bankruptcy attorneys are standing by to help you prepare your case so that your filing is made on time. 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, PA
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 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, 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 is 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 the 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
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 cram down 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 free 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, PA
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 are trying to achieve by filing.
Debts that Can Be Discharged by Filing for Bankruptcy in King of Prussia, PA
Filing for bankruptcy aims to eliminate as much debt as possible and provide a fresh financial start. Throughout the process, different types of debts will be discharged, either immediately or at the end of the bankruptcy process. Once discharged, you are no longer obligated to pay the debts, and this order is permanent. Creditors are prohibited from pursuing collection.
If you find yourself buried under an insurmountable amount of medical debt, you may be wondering if filing for bankruptcy is a viable solution. The good news is that medical debt, being an unsecured debt, can be discharged under Chapter 7 bankruptcy. This means that the debt does not have any collateral backing it, making it easier for you to eliminate it.
However, if you opt to file for Chapter 13 bankruptcy, only a portion of your medical debt might be included in your repayment plan, much like credit card debts. In such a scenario, you will need to complete the repayment portion of your bankruptcy case before any remaining debts, including medical debt, can be discharged.
Keep in mind that bankruptcy should always be viewed as a last resort, and it is always advisable to consult with a qualified attorney to determine if it is the appropriate option for you. But if medical debt is weighing heavily on you, know that there are options available to help you regain control of your finances.
Credit Card Debt
If you choose to file for Chapter 7 bankruptcy, your credit card debt will usually be eliminated right away. However, if you opt for Chapter 13 bankruptcy, your debts will be reorganized, and this could involve incorporating your credit card debt into a repayment plan. Once you have successfully fulfilled all the requirements of the plan, any remaining debt may be discharged based on your specific financial situation.
Filing for bankruptcy can be a viable option for eliminating or discharging unsecured personal loans, which are loans that are not backed by your personal property. It is worth noting that personal loans from friends, family, or employers can also be discharged through bankruptcy. Other types of debt that can be discharged through bankruptcy include condominium fees, cooperative fees, or Homeowner Association fees, which can be discharged under Chapter 13. Additionally, loans obtained from retirement plans can also be discharged under Chapter 13.
Debts that Cannot Be Discharged by Filing for Bankruptcy in King of Prussia, PA
Unfortunately, not all debts can be eliminated through bankruptcy. The debts that cannot be discharged might vary depending on the type of bankruptcy being pursued. Often, public policy considerations are the reason behind the elimination of these debts. However, determining which debts will be discharged and which ones will remain requires a careful evaluation of the facts. Here are some examples of debts that usually cannot be eliminated through bankruptcy:
It is highly unlikely that student loans will be discharged, whether they were obtained from the government, private lenders, or a university. There are only a few exceptions to this rule, such as in the event of a borrower’s disability that prevents them from working, and proof of this can be provided. Another exception is when the borrower is facing undue hardship and can demonstrate that they have made every effort to repay the loan.
However, qualifying for a discharge based on these exceptions is a challenging process. The borrower must prove that repaying the loan would prevent them from maintaining a basic standard of living. Other debts that are typically ineligible for discharge include fines or penalties imposed by government agencies, as well as personal injury debts arising from driving under the influence. Furthermore, debts resulting from fraud, embezzlement, larceny, or breach of fiduciary duty, as well as any debts or creditors that were not included in the bankruptcy petition, are also unlikely to be discharged.
Child and Spousal Support
In most bankruptcy cases, any outstanding debts for child or spousal support, as well as alimony, cannot be discharged. This means that these legal obligations cannot be eliminated through the bankruptcy process. Therefore, once your bankruptcy case is concluded, you will still be required to pay any remaining balance for these types of obligations.
While some types of taxes cannot be eliminated through bankruptcy, there are some exceptions to this rule. Tax debt that meets certain qualifications can be discharged. In Chapter 7 cases, federal or state income taxes may be wiped out if they are associated with a return that was due at least three years prior to the bankruptcy case. This three-year timeline includes any extensions that may have been granted by the state or federal government for tax payment. However, non-income tax debts, such as property taxes and tax liens that are attached to your property cannot be eliminated through a bankruptcy filing.
Our King of Prussia, PA Bankruptcy Lawyers Can Help
For a free case evaluation with our bankruptcy lawyers, contact Young, Marr, Mallis & Deane today at (215) 701-6519.