Montgomery County, PA Bankruptcy Lawyer
Bankruptcy is often perceived as a punishment for bad financial decisions, but this is simply not true. Filing for bankruptcy might have some unpleasant consequences, but it might help you escape the debt holding you back.
Filing for bankruptcy under Chapter 7 of the Bankruptcy Code is often the fastest way to get a fresh financial start. Alternatively, Chapter 13 can help you keep your valuable assets and property while you work on managing your debt. People who are overwhelmed with credit card bills, utility expenses, and other debts are often hesitant to consider bankruptcy as an option. These debts are often discharged through bankruptcy, and people in debt are no longer liable for repayment. It is important to remember that bankruptcy was specifically designed for individuals and couples facing financial hardship, but there are certain negative consequences to bear in mind. Having a bankruptcy on your records might hinder you from taking advantage of future economic or business opportunities. Your attorney should help you get together the documentation and records you need to begin your case.
Arrange a free case review by calling our bankruptcy lawyers at Young, Marr, Mallis & Associates at (215) 701-6519.
Chapter 7 Bankruptcy in Montgomery County
More Chapter 7 bankruptcies are filed in Montgomery County than in any other chapter. When people think of bankruptcy, they probably imagine something similar to Chapter 7. Commonly referred to as a “liquidation bankruptcy,” Chapter 7 allows an individual or couple to discharge a substantial debt in four to six months.
Chapter 7 may sound too good to be true. While some strings are attached, a Chapter 7 bankruptcy could quickly improve your financial condition. Only certain people qualify for Chapter 7. Fortunately, the requirements are not as stringent as many people believe.
To qualify for Chapter 7, our bankruptcy attorneys must check if you pass a means test. This test requires looking at your average household income for the previous six months and determining if it is above or below the median income in your area. If it is below, you are eligible to file a Chapter 7. If your income is higher, you could still qualify after deducting a number of allowed expenses.
Another fear people have regarding Chapter 7 is losing their property. When you file for bankruptcy, all your assets go into the bankruptcy estate. A court-appointed trustee could sell anything in the bankruptcy estate to repay your creditors. However, the Bankruptcy Code and state law provide exemptions that a debtor could use to protect their property.
Nearly every Chapter 7 bankruptcy in Montgomery County is administered as a “no asset” bankruptcy. This means that the debtor could protect everything they owed. Our office will thoroughly review your personal property and other assets to determine if anything is at risk if you file for bankruptcy.
Chapter 13 Bankruptcy in Montgomery County
If you file for Chapter 13 bankruptcy, you can protect your assets by developing a court-approved payment plan or schedule. Rather than liquidate assets and property, you and your attorney will devise a feasible payment plan to help you catch up on missed mortgage payments and other debts over a certain period. The idea is that once the plan is completed, you will have caught up enough on debts to avoid losing assets, and other debts might be discharged, freeing you up to focus on paying off any remaining debts.
The court must approve payment plans, and creditors will have the opportunity to review the plan and voice any objections. Additionally, payment plans are often designed to last for several years. It is important that your plan is feasible. Otherwise, you risk falling behind again and losing your home or other assets to angry creditors.
The Difference Between Chapter 7 and Chapter 13 Bankruptcies in Montgomery County
Chapter 7 is designed for people with limited assets and income who are overwhelmed by debt. For individuals plagued by collection letters, phone calls, and lawsuits, filing for Chapter 7 might be the best option available. However, a Chapter 7 bankruptcy is not appropriate for every situation. For example, if you are behind on your mortgage and your home is in foreclosure, a Chapter 7 bankruptcy will probably not allow you to keep your house.
While it will temporarily stop a sheriff’s sale, there is no mechanism to pay your mortgage arrears through Chapter 7. The most significant difference between a Chapter 7 and a Chapter 13 bankruptcy is the Chapter 13 bankruptcy plan that provides monthly payments to secured and priority creditors. While some people find it challenging to adhere to the payment plan for such a long time – they tend to last for several years – doing so may help you hang on to your home and other assets.
When you first meet with an attorney, they might review your income, debts, and financial goals to help determine what chapter of bankruptcy would be most beneficial.
Determining Which Bankruptcy Chapter is Right for Your Circumstances in Montgomery County, PA
The bankruptcy chapters mentioned here have pros and cons you should weigh with our experienced bankruptcy lawyers. If you are facing foreclosure or creditors are threatening to repossess your property and belongings, Chapter 13 might be your best option. If you would rather let go of your assets and get a fresh start faster, you can talk to a lawyer about Chapter 7 bankruptcy.
Pros and Cons of Chapter 7 Bankruptcy
Chapter 7 bankruptcy has several key benefits that make it a popular option among people experiencing severe debt. Perhaps the biggest advantage of Chapter 7 bankruptcy is how quickly it happens. For many, the Chapter 7 bankruptcy process takes a few short months. This means that only a few months after your claims are filed, you might be in a lot less debt.
The downside to Chapter 7 bankruptcy, especially for those facing foreclosure, is that they will likely lose their property and assets. If you have assets you do not want to lose, like your home, Chapter 7 is not an ideal option. Speak with a lawyer before making any decisions.
Pros and Cons of Chapter 13 Bankruptcy
Chapter 13 is arguably the better option for people facing foreclosure or those who want to hang out on to as much of their property as possible. It allows them to reorganize their finances so they can catch up on missed payments and hopefully avoid losing assets. Perhaps the biggest advantage here is that people who file for Chapter 13 bankruptcy might keep their property and assets.
The downside to Chapter 13 is the time commitment. Payment plans devised under Chapter 13 often stretch for several years, and people must adhere to their payment plans or risk going back into debt and losing their homes. Depending on your situation, the payment plan might be very strict, and you might have little expendable income during this time.
Dischargeable and Non-Dischargeable Debts Through a Montgomery County Chapter 7 Bankruptcy
While Chapter 7 could be the first step to getting back on your financial feet, it does not address every problem you might have. First of all, only certain types of debts are eliminated. Through Chapter 7, a filer will be able to discharge a vast amount of their unsecured debt, including credit cards, medical bills, personal loans, some taxes, and certain utility bills.
However, not every debt is dischargeable. You will not be permitted to eliminate your obligations if you owe back alimony, child support, or criminal restitution. Furthermore, most tax debts will survive your bankruptcy. Utility bills could be discharged unless the utility company obtained a municipal lien on your property.
Secured debts, such as mortgages or car loans, are not dischargeable unless you surrender the property. For example, if you are months behind on your car payments and cannot afford the regular payments, you could return the car to the lender and discharge the remaining balance due under your loan. This way, you could avoid a deficiency judgment.
Student loans are generally not dischargeable through bankruptcy. However, that does not mean it is impossible.
Consequences of Filing for Bankruptcy in Montgomery County, PA
Although bankruptcy is not a punishment imposed on people struggling financially, it might have some negative consequences. Perhaps the most widely known negative effect bankruptcy can have is reducing your credit score. Generally, when people file for bankruptcy, their credit score takes a pretty significant hit. Anyone familiar with their credit score can tell you it takes a very long time to build up your score, and having it reduced seemingly overnight can be difficult.
Another drawback to consider is future opportunities you might miss out on. For example, once you have gotten back into a better financial situation, you might want to take out a loan to return to school, open a business, or buy some property. When you do this, financial institutions and creditors can see in your credit history that you filed for bankruptcy, and they might be less inclined to approve your loan.
Although these consequences are unpleasant, to say the least, your attorney can help you try to mitigate them as much as possible. For example, we can work to help you get as much of your debt discharged as possible, so you can focus on rebuilding your finances and hopefully strengthen your credit score faster. We can also help you develop a realistic payment plan for Chapter 13 cases, making it easier for you to keep up with the plan and remain on schedule to get your debt discharged.
What You Need for Your Bankruptcy Case in Montgomery County, PA
A bankruptcy case is somewhat different from many other civil actions. You are not exactly filing a lawsuit, but you do need evidence and information to support your case in court. Bankruptcy cases rely primarily on financial information and records.
Before starting your case, we need to thoroughly assess your finances. All debts must be accounted for, including mortgages, loans, credit cards, and unpaid bills. Not only are these records important for determining how much debt you have, but we also need them to determine what kind of debts, if any, can be discharged.
It might also be helpful to gather evidence that demonstrates why you cannot repay the debts. If you are filing bankruptcy because of circumstances you cannot control (e.g., you became disabled and cannot work), some proof of those circumstances might make the court more inclined to help you.
Contact Our Experienced Montgomery County, PA Chapter 7 Bankruptcy Attorneys
To schedule a free review of your finances and case, call our bankruptcy lawyers at Young, Marr, Mallis & Associates at (215) 701-6519.