Pottstown, PA Bankruptcy Lawyers
If you are feeling crushed by debt, unable to pay your monthly expenses, or fear losing your home to foreclosure, filing for bankruptcy could offer you the relief you and your family desperately need.
There is no shame in filing for bankruptcy. Bankruptcy was designed to give hardworking people a means to pull themselves out of an economic hole. Bankruptcy provides the tools and legal protections to obtain a fresh financial start. How filing for bankruptcy benefits you depends on your unique circumstances. Whether you file Chapter 7 or 13, you can settle your debts with creditors. It is important to consider your income and expenses when considering bankruptcy, as well as your willingness to liquidate certain assets. Regardless of the type of bankruptcy filed by debtors in Pottstown, debtors can generally exit bankruptcy in a manner of a few short months or years.
To schedule a free case analysis with our Pottstown, PA bankruptcy lawyers, call Young, Marr, Mallis & Associates today at (215) 701-6519.
Who Should File for Bankruptcy in Pottstown, PA?
Filing for bankruptcy is a major decision. For many people, bankruptcy is a way to start over. For others, bankruptcy is a means to protect their most cherished possessions. However, in some situations, filing for bankruptcy is analogous to using a sledgehammer on a finishing nail. How do you know if you need to or should file for bankruptcy?
There is no “one” or “correct” answer. However, if certain circumstances exist, you should consider speaking with one of our experienced bankruptcy lawyers. For example, bankruptcy might be a good solution to your problems if the majority of your debts are unsecured, such as medical bills, credit card debt, or unsecured personal loans. Bankruptcy can also help if it would take you over five years to pay your creditors, not including your mortgage or car loan.
Receiving harassing collection calls, letters, or emails, falling more than a month behind on multiple debts, having expensive medical bills and limited or no medical insurance, having little savings and few assets, getting threatened with car repossession, or facing a mortgage foreclosure action are other common reasons why people choose to file for bankruptcy in Pottstown.
The Advantages of Filing for Bankruptcy in Pottstown, PA
The benefits filing for bankruptcy provides depends on what chapter you file and the type of debt you have. That said, there are a few perks that come along with most bankruptcy filings, such as an automatic stay.
The Automatic Stay
When you file for bankruptcy, a legal wall is erected between you and your creditors. This injunction, known as an automatic stay, goes into effect whether your file a Chapter 7 or Chapter 13 case. Creditors are prohibited from attempting to collect a debt after you file. This means they are not allowed to call you, send you letters, or file a lawsuit against you. For example, if your house was scheduled for a sheriff’s sale, filing for bankruptcy will stop the sale. Additionally, wage garnishments will cease, bank accounts will be unfrozen, and in some cases, repossessed vehicles will be returned.
Eliminate Unsecured Debt
Most people file for bankruptcy to discharge unsecured debt. If you qualify, you could eliminate your unsecured debt, including medical bills, personal loans, and credit card debt, in five or six months through a Chapter 7 bankruptcy. While you might be required to pay a portion of your debt back if you file Chapter 13, debtors typically still discharge a significant portion of their unsecured debt. Our lawyers will evaluate and examine your debt to determine what is dischargeable.
Pay Back Secured Debt
Sometimes people want to file for bankruptcy to pay back secured debts. A common example is a homeowner who fell behind on their mortgage. Filing a Chapter 13 case allows a homeowner to pay their mortgage lender over a period of three to five years. In most cases, this is a much more manageable payment schedule than the mortgage company would offer if bankruptcy was not filed. Depending on the homeowner’s income and assets, they could also discharge unsecured debt. Paying secured debt is not limited to homes. Many people file for bankruptcy to keep their car or truck.
No Tax Obligations on Discharged Debt
Bankruptcy offers a huge advantage that many people fail to consider when weighing their debt relief options. It is possible to settle with a credit card company or another creditor without bankruptcy. Some creditors will offer a settlement, requiring the debtor to pay a portion of the debt while forgiving the remaining balance. Typically, this amount will have to be paid in one lump sum. One drawback to settling with a creditor is that forgiven debt is considered taxable income. This means you must list any forgiven debt as income when you file your federal tax returns. The additional income means you could lose an anticipated refund or you could owe additional taxes. When you file for bankruptcy, any discharged debt is not considered income for tax purposes.
Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy
Chapter 7 bankruptcy and Chapter 13 bankruptcy each offer different advantages to a debtor depending on their unique situation. For example, individuals who are weary of being hounded by bill collectors and want a relatively quick solution will likely elect to file for Chapter 7. Others who believe they could afford their debt under different circumstances are more inclined to choose Chapter 13. However, before selecting a certain type of bankruptcy, you should understand how each type operates.
How Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy is a form of bankruptcy that liquidates the assets of a debtor to pay off creditors. Specifically, a bankruptcy trustee will be appointed to collect all nonexempt assets of the debtor and use them to satisfy debts to creditors. A nonexempt asset is the property of a debtor that can be liquidated to pay off a debt. While the types of nonexempt assets may be different depending on the state you reside in, the common nonexempt assets include valued artwork, designer clothing, jewelry, investments, coin collections.
This is not an exhaustive list. The bankruptcy court may consider other nonexempt assets.
To initiate a Chapter 7 bankruptcy, a debtor must file a petition with the bankruptcy court where the debtor resides or where they have chosen to incorporate their business. When filing the petition, the debtor must also include information regarding their assets and liabilities, income and expenses, a financial statement, and similar documents.
If a debtor successfully files for Chapter 7 bankruptcy, they will be released from personal liability for various types of debts. Many people prefer this form of bankruptcy because of the possibility that the entire process will be complete within three months. The types of debt that can be discharged in bankruptcy include: medical bills, credit card debt, personal loans, past-due utility bills, civil court judgments, business debts, and Social Security overpayments.
There are other debts that can be discharged in a Chapter 7 bankruptcy. In some cases, it is also possible to have your student loans discharged if you can prove that you are unable to pay them.
How Chapter 13 Bankruptcy Works
Chapter 13 bankruptcy allows a debtor to reorganize their debts into a more affordable form to make it easier to manage the payments. Chapter 13 is typically preferred by individuals who have a steady source of income but that have issues staying current on their bills. When creating a reorganization plan, the debtor must provide a list of creditors and the debt and type of claim the creditor has, the income of the debtor, their sources of income, and often the debtor is paid, a list of all property owned by the debtor, and the monthly living expenses of the debtor including food, medication, transportation, and various other expenses.
Using this information, the debtor is expected to create a debt reorganization plan meant to span about five years. The advantage of this plan would be that the debtor can consolidate their debt and make a single monthly payment at a lower rate that is distributed among their creditors. In some cases, the debtor may be approved for a three-year payment plan if they can present evidence showing that a five-year plan would not be necessary.
Once the debtor completes their payment plan, their remaining debt will be discharged. It is also important to note that a filing for bankruptcy may be challenged by a creditor as a reorganization plan would mean they receive less money than they were owed.
Additionally, once bankruptcy proceedings have been initiated, whether you filed for Chapter 7 or Chapter 13, you will receive an automatic stay. An automatic stay prevents creditors from pursuing payments or sending your account to collections until the bankruptcy proceeding has concluded. This will give a debtor time to work with our experienced attorneys to improve their odds of successfully filing for bankruptcy.
Dischargeable Debts vs. Non-Dischargeable Debts in Pottstown, PA
Some debts can be effectively erased during bankruptcy, leaving debtors with no legal obligation to repay them. Other debts are not dischargeable and must be repaid by debtors during bankruptcy in Pottstown.
Dischargeable debts vary, depending on the chapter of bankruptcy filed. Certain debts, such as medical and credit card debt, are always dischargeable. Chapter 13 allows for more debts to be discharged than Chapter 7, such as debts for malicious or willful injury to property, debts for certain tax obligations, and debts from property settlements in divorce or separation proceedings.
Debts that are not dischargeable include debts arising from alimony and child support. Generally, student loan debt is not dischargeable unless a debtor can prove undue hardship. If a debt is not dischargeable, it must be repaid in bankruptcy. If some or all of your debt is dischargeable, for example, if you are only struggling with credit card debt, it will be erased when you file, allowing you to exit bankruptcy sooner.
Liquidation Exemptions for Bankruptcy Filers in Pottstown, PA
Depending on the amount of debt you have and the type of debt you have, filing Chapter 7 might put you at risk of substantial asset liquidation. Fortunately, debtors in Pottstown can choose between state or federal liquidation exemptions to protect specific assets.
Pennsylvania’s liquidation exemptions for debtors filing Chapter 7 are sparse. There is no vehicle exemption, nor is there a homestead exemption. The state’s wildcard exemption is only $300 and can be applied to any personal property.
Instead of having to use state exemptions, bankruptcy filers in Pottstown are permitted to use federal exemptions. These exemptions tend to be more expansive, allowing debtors to protect important property and assets, such as their homes and cars. You can use as many exemptions as your situation permits. You cannot choose some state exemptions and some federal exemptions; you must choose from one set of exemptions only.
If you want to use exemptions to protect certain assets or property from liquidation, name them in your bankruptcy petition. Our bankruptcy lawyers can help you identify the exemptions that best suit your situation so that you do not risk the liquidation of certain assets during Chapter 7 in Pottstown.
Things to Consider When Filing for Bankruptcy in Pottstown, PA
Declaring bankruptcy is a huge financial and personal decision for debtors in Pottstown. Before you file, our lawyers will review a few things that you should consider before making this important decision.
If you are married, consider filing a bankruptcy case without your spouse. If your spouse is not your co-debtor, they will be unaffected by bankruptcy. This means that the impact of bankruptcy on your credit might not impact your family as much. Although you are married, your decision to enter bankruptcy alone will not hurt your spouse’s credit.
Bankruptcy will impact your credit, however. While the impact on one’s credit should not wholly influence their decision to file for bankruptcy, it is important to consider so that you can make a conscious effort to rebuild your credit after bankruptcy. Bankruptcies stay on credit reports for no longer than ten years in Pottstown. While that can seem like a long time, you can see improvements to your credit within a few months of exiting bankruptcy, provided you intentionally take steps to rebuild it.
Bankruptcy is a time commitment. You will most likely have to go through mediation with creditors and, if you file Chapter 13, will have to fulfill the requirements of your repayment plan, which could take between three to five years in Pottstown. That said, the end result will leave you without debt. If you choose not to file for bankruptcy and handle your debt alone, you might fall further into debt, making climbing out of it all the more difficult.
Call Our Pottstown, PA Lawyers for Help Filing for Bankruptcy
To get a free and confidential assessment of your case from our bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519.