How to Prepare to File for Bankruptcy in Pennsylvania
Bankruptcy can be intimidating – especially if you are unfamiliar with the process. There is a significant amount of misinformation spread through social media and word of mouth. Even when the facts are accurate, the context is wrong or the practical application is misconstrued. At Young, Marr & Associates, our Philadelphia bankruptcy attorneys aim to make the process as painless as possible. This includes limiting the amount of paperwork a filer must initially produce.
Typically, when you first meet with one of our experienced lawyers, we request that you provide proof of income, a paystub or two, and a copy of income tax returns. During the initial consultation, we will review your unique circumstances and request additional documents based on your situation.
While our firm will complete the necessary forms, documents, and schedules, you will have to provide the information needed to complete the bankruptcy paperwork. A successful bankruptcy case begins long before the voluntary petition is filed. Below, we discuss what you could do to prepare if you are planning on filing for bankruptcy. Additionally, we review the initial steps we will take at Young, Marr & Associates to ensure an accurate filing. If you have questions regarding filing for bankruptcy, contact us at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania.
Prooving Your Income for Pennsylvania Bankruptcy
Whether you are filing a Chapter 7 or Chapter 13 case, our Pennsylvania bankruptcy lawyers will have to examine your income. Therefore, you have to provide proof of your household income.
To complete the means test, we will need paystubs for the six months prior to the estimated filing date. For example, if you were planning to file in December, you would have to provide paystubs from November, October, September, August, July, and June. The information should be complete, meaning our office needs to see the gross income and all the various deductions, such as federal withholdings, state taxes, and healthcare contributions. If you are paying back a 401(k) loan or have other withholdings, they could impact your case.
For the self-employed, this part requires more work. You will have to complete a business questionnaire, including monthly reports indicating income and expenses. Our Pennsylvania bankruptcy lawyers will advise and guide you. We do not expect you to have this information completed before your first appointment at our office.
It is important to stress that we require proof of household income. If other people are earning money in your home, even if you are the only one filing, it must be included. For example, if your spouse is working or collecting unemployment, it must be listed in your bankruptcy documents. Additionally, if you have an elderly parent living with you that is receiving a pension of Social Security benefits, it must be listed.
Other Financial Documents Required for a Pennsylvania Bankruptcy Case
Our office represents a wide range of individuals, couples, and businesses. Every situation is unique, and no one shares the same financial circumstances. However, there are some common financial documents and statements required in a typical bankruptcy filing.
Bankruptcy is governed by federal law. Therefore, you must have filed your federal income tax returns to take advantage of the relief granted under the Bankruptcy Code. If you have not filed taxes for the previous four years and were required to, you should bring this to our attention or see a tax professional. Our Bucks County bankruptcy lawyers will need copies of the last four years of federal and state tax returns before your filing date.
You must also provide bank statements for every account you have, even if the account is sitting idle. Initially, we request statements for the last two months. However, depending on the facts of your case, we could require additional statements.
Pennsylvania Bankruptcies and Fraudulent Conveyances
There are some things you could that could derail your case before you call our compassionate Pennsylvania bankruptcy lawyers. One has the rather ominous-sounding name, “fraudulent conveyance.” A fraudulent conveyance does not necessarily constitute fraud, though it could. When you transfer money or property prior to filing for bankruptcy, it could be considered a fraudulent conveyance if it occurs within a certain period before the filing date. In Pennsylvania, the lookback period is four years, while in New Jersey, it is only two years.
A fraudulent conveyance occurs when a potential filer transferred funds or property for a lack of consideration when they were insolvent. For example, if you transferred title to a piece of property before filing for bankruptcy, that property could still be considered part of the bankruptcy estate. If this happens, the transfer would be voided. The purpose of this lookback period is to stop people from hiding or transferring assets before filing.
In most cases, someone transfers property without understanding the implications. Therefore, our Allentown bankruptcy attorney will review any transfers you made over the relative time frame. Maybe you repaid a loan to a family member or a friend months before even thinking about bankruptcy. Or perhaps you transferred a house to your children three years ago before your financial situation grew significantly worse over the intervening years. These situations create a problem if you want to file for bankruptcy, even if they were done with the best intentions. Depending on the nature of the transfer, we could request to have the property or funds returned or simply wait until the lookback period has passed.
Unintentional Mistakes People Make That Make it Impossible to File for Bankruptcy
One worry people have is making a mistake that will make it impossible to file for bankruptcy. As discussed above, a transfer of property or funds could impact your case or require you to wait to file. However, there are very few things that you could do that make it impossible to file.
The unfortunate reality is that, for some people, filing for bankruptcy is just not a feasible option. For example, if you have a limited income, significant equity in your home, and a substantial amount of credit card and medical debt, a bankruptcy will not be helpful. The equity makes filing Chapter 7 impossible without losing the home and there is simply not enough income to make the required payments in Chapter 13. Part of the initial consultation is determining if filing for bankruptcy is a viable answer to someone’s economic difficulties.
Paying Creditors Through a Chapter 13 Bankruptcy
Most people coming into the offices of Young, Marr & Associates are looking for a Chapter 7. This is because, in Chapter 7, you can eliminate the bulk of your debt within four or five months. When you file Chapter 13, you are required to pay your creditors back. We understand that this does not sound as good.
Some people think that since they do not qualify for Chapter 7, bankruptcy is not an option. They could not be more wrong. There are advantages to paying your debt through bankruptcy. When you are preparing to talk to one of our Pennsylvania lawyers, you should gather all your bills and debts so you have a good idea of who and what you owe. In most cases, potential filers are entitled to a free credit report. This is important because, without knowing the amount and type of debt, it is difficult to determine if filing for bankruptcy is your best option.
However, in most Chapter 13 cases, if you owe a significant amount of money, you will likely only have to pay a percentage of it back through your bankruptcy plan. What you pay is determined by the means test, income, non-exempt assets, and type of debt. Remember, bankruptcy is not a negotiation. Objective facts are used to determine the amount and your creditors are typically required to accept the amount they receive.
To illustrate this, imagine a debtor with $100,000 of credit card debt, medical bills, and personal loans. They make too much money to qualify for Chapter 7. Their disposable monthly income, as determined by the means test, is $400. Therefore, they will have to pay $400 a month to their unsecured creditors for 60 months, or a total of $24,000 over five years. The remaining $76,000 would be discharged at the end of the bankruptcy. Typically, a portion of our fees are paid through the bankruptcy plan, along with a mandatory trustee fee, so the $400 payment will be slightly higher. Nonetheless, under these circumstances, the debtor likely receives a better settlement than they would if they tried to work directly with their creditors.
In many Chapter 13 cases, a debtor is paying back required debt, such as mortgage arrears or back taxes. In these situations, unsecured creditors might not be paid a dime. By providing our Bethlehem bankruptcy lawyers a comprehensive list of your debt and income, our office is in a better position to calculate a more accurate estimated bankruptcy payment.
Gather Documents Regarding Lawsuits, Collection Actions, or Foreclosures
People who are considering filing for bankruptcy are often seeking relief from more than debt. Many are facing collection lawsuits, garnishments, or foreclosures. Fortunately, filing for bankruptcy stops all other legal proceedings against a filer. In most cases, if you were being sued and had a court date, the bankruptcy will stop the proceeding. Similarly, under most circumstances, if your house was scheduled for sheriff’s sale, the sale will be canceled.
When you gather information and documents before calling our Pennsylvania bankruptcy lawyers, be sure to have any paperwork related to any legal proceedings. Timing is important when it comes to filing for bankruptcy. While bankruptcy provides protection from creditors, if a sheriff sale was concluded or if a judgment was entered, your bankruptcy filing could be too late. Another situation where this information is vital is when dealing with an eviction. If your landlord has obtained a judgment, a bankruptcy only offers very limited protection. Providing this information at the very beginning of the process limits the likelihood of missing an important date. It also allows our office an opportunity to expedite the filing process if necessary.
Also, let our office know if you filed a previous bankruptcy case. While part of our process is verifying whether you have a previous filing, it is important that our office knows this information as soon as possible. In fact, if you are calling to make an appointment and filed for bankruptcy in the past, you should have your case number available.
Mortgage Payments and Chapter 13 Bankruptcies
One of the primary reasons people file Chapter 13 is to stop a foreclosure or sheriff’s sale. If this is your case, you should gather all the paperwork that pertains to your foreclosure case. As stated above, you want to file before your home is sold at auction. If possible, you should also file before a judgment is entered. This could save you money in penalties, attorney fees, and other costs. It is also critical to know what your mortgage payment was and where to send it. Once you file for bankruptcy, you must begin paying your monthly mortgage payment directly to your lender. The bankruptcy will address the money you are behind. It is your job to ensure you stay current with your mortgage going forward.
We are not permitted to reduce your mortgage payment through bankruptcy. However, we will work with you to try and obtain a loan modification. In Pennsylvania, a debtor is free to pursue a loan modification with the lender. A modification is subject to approval from the court. In New Jersey, the court actively encourages the parties to consider a loan modification.
Pennsylvania Bankruptcy Attorneys Offering Free Consultations
Filing for bankruptcy is often the best financial recovery plan for you and your family. However, many people are frightened or do not understand the process. At Young, Marr & Associates, our experienced Norristown bankruptcy lawyers are at your side – you do not have to go through this stressful experience by yourself. Our team is there to help you from the moment you make that first call to our office. We understand the importance of preparation. To start the process, call us at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania.