Pennsylvania Bankruptcy Lawyer

Filing for bankruptcy can be a stressful, challenging time. Most people who file have never done so before and are unsure of what to expect, what to do, and what will happen to their debts, assets, and credit. But while bankruptcy has a frightening reputation, filing is actually a proactive and responsible step toward financial recovery and the independence it brings.

When you are dealing with overdue bills, missed mortgage payments, harassing calls, and collection litigation, the last thing you believe you have at your disposal is money. We understand that, and we are sympathetic to the emotional distress caused by economic hardship. We offer flexible payment plans built around your budget, and your initial consultation is free.

Bankruptcy law is complicated, but at Young, Marr, Mallis & Associates you are in good hands. With over 5,000 cases filed and more than 20 years of experience, our Pennsylvania bankruptcy lawyers have decades of hands-on working knowledge of both Chapter 7 and Chapter 13 individual bankruptcies. No matter how complicated, hopeless, or overwhelming your financial situation seems, we have been there before, and we walk our clients through every step with compassion and respect, from initial filing all the way to final discharge. Call (215) 701-6519 for a free legal consultation.

Why File for Bankruptcy in Pennsylvania?

The world of bankruptcy is rife with negative myths and misconceptions. Sometimes false ideas about bankruptcy deter people from filing at all. That is unfortunate, because for many people bankruptcy is a powerful tool that offers real benefits and protections beyond relief from overwhelming debt. In many instances it is more cost-effective than debt consolidation or debt settlement.

Debt Elimination

For consumers there are primarily two categories of bankruptcy: Chapter 7 (liquidation) and Chapter 13 (reorganization). Both allow petitioners to discharge or eliminate a wide variety of debts. Depending on which type is appropriate, you may be able to completely eliminate debts such as:

Utility bills
Medical bills
Personal loans
Business loans
Credit card debt

No Taxes on Forgiven Debt

Canceled or forgiven debt is usually added to gross income when you file your federal income taxes. That means $10,000 of debt forgiveness would require you to report an additional $10,000 of income, increasing what you owe. When debt is eliminated through bankruptcy, the discharged debt does not count as income and does not increase your tax bill. A debt settlement company cannot offer you that. If $70,000 were forgiven in a settlement agreement, you would owe income tax on it.

Protection from Collectors

From the moment you file, you are protected by an automatic stay: a legal wall between you and your creditors that limits or stops what they can do to collect. While an automatic stay is in place, a creditor cannot call you or send you bills, and legal proceedings such as a lawsuit or sheriff sale are stopped. Next to debt elimination, the automatic stay is the chief reason many people file. Its advantages include:

An immediate stop to collection calls and letters
Delays against service shut-offs for unpaid utility bills
Delays against eviction and foreclosure

Credit Healing

One of the most persistent myths about bankruptcy is that it destroys your credit permanently and you will never again be able to buy a house or car or take out a loan. A bankruptcy does remain visible on your financial record for a set period before disappearing, but eliminating outstanding bills and debts gives you the opportunity to begin again on a level playing field. Once a bankruptcy is discharged, making timely bill and credit card payments can restore good, healthy credit.

Peace of Mind

Peace of mind is not quantifiable like debt discharge or credit repair, but for many petitioners it is the most valuable part of filing. Constant creditor harassment and worry about the future lead many debtors to suffer stress, depression, and anxiety. With a consumer bankruptcy attorney on your side, you can banish creditors and regain the confidence that you control your finances, your future, and your life.

How to Affordably File for Bankruptcy in Pennsylvania

When you are struggling to pay for weekly groceries, credit card bills, or your monthly mortgage payment, the last thing you are considering is the additional expense of a lawyer. In most cases, that cost is well spent. The bankruptcy process is too complicated and too costly to attempt without an experienced attorney at your side, and the protections that begin the day you file often ease your monthly expenses immediately.

Once the automatic stay takes effect, you are no longer required to pay monthly credit card bills. Outstanding credit card debt will either be eliminated or addressed in your bankruptcy plan. Unsecured personal loans and payday loans can be ignored once you file, and any direct withdrawals from your bank account to pay them will cease. Creditors are prohibited from making harassing phone calls, sending bills, or pursuing legal action to collect.

Utilities such as water and electricity are a necessity, and falling behind can bring threats of shut-off, termination of service, or higher monthly payments to cover arrears. Once you file, any outstanding utility bill is eliminated or addressed in your plan, and going forward you pay only for the services you use.

Student loans are difficult to discharge in bankruptcy, but filing can still offer a reprieve. Lenders are prohibited from collecting student loan debt while your case is open, roughly five to six months in Chapter 7 or three to five years in Chapter 13. Interest continues to accrue during that period, but the break can give you the time you need to reach a better financial position.

Which Type of Bankruptcy Is Right for You?

The idea of filing is formidable. During your initial consultation, our attorneys work to ease any anxiety you may be feeling. Through a series of questions we evaluate your financial situation and propose workable options to achieve your goals. Our objective is for you to be comfortable and to understand the process, including the benefits and advantages of both Chapter 7 and Chapter 13.

Generally, Chapter 7 is for individuals with limited income, mostly unsecured debt, and no substantial assets. Commonly called liquidation bankruptcy, it is a relatively short proceeding that allows a debtor to eliminate the vast majority of their debt.

Chapter 13 is for individuals with substantially more income, or who are filing to pay specific types of debt such as mortgage arrears or back taxes. The heart of a Chapter 13 is the reorganization plan, whose terms must adhere to several code provisions and address your debt. Most debtors file Chapter 13 to address a specific debt. For example, a debtor filing to pay overdue real estate taxes must pay the delinquency over 36 to 60 months, and the proposed plan indicates the monthly amount paid to a court-appointed trustee to satisfy that debt.

Chapter 7 Bankruptcy in Pennsylvania

Chapter 7, also called ordinary bankruptcy, straight bankruptcy, no-asset bankruptcy, or liquidation bankruptcy, is the most common type of case. Statistics indicate Chapter 7 accounts for approximately two thirds of all consumer bankruptcy filings.

Chapter 7 allows the person filing, called the debtor, to discharge unsecured debts, meaning debts not secured by collateral. That includes credit card bills, medical bills, utility bills, and most personal loans.

If you file Chapter 7, you may be able to keep your car, your home, and other possessions by using bankruptcy exemptions. Debtors in Pennsylvania may choose between federal exemptions and state exemptions, which protect certain assets depending on your equity in them. Most debtors choose the federal exemptions, which provide a greater level of asset protection, though there are cases where the Pennsylvania exemptions are the better choice.

A court-appointed official called the trustee is assigned to each Chapter 7 case and has the authority to sell the debtor’s non-exempt assets and distribute the proceeds to creditors. In the majority of Pennsylvania cases, however, exemptions protect most or all of the debtor’s property.

When Chapter 7 May Be Appropriate for You

You have primarily unsecured consumer debts.
You have limited equity in your home, you are a renter, or your home is owned as husband and wife and the unsecured debt is primarily in only one party’s name.
You have a moderate or modest income.
You have little or no money left after paying your necessary living expenses.
You do not have significant liquid assets.

Advantages of Filing Chapter 7

Chapter 7 is faster than other types of bankruptcy, there is no requirement to make monthly payments to a trustee, and it is less costly than Chapter 13. Discharge comes at the end of a process that typically takes only three to five months from the filing date. In most cases you immediately stop making payments to all unsecured creditors and come under the protection of bankruptcy law. The filing of a bankruptcy, whether Chapter 7, 11, or 13, produces an automatic stay that immediately stops all creditor action. Despite the significant changes to the bankruptcy laws effective October 17, 2005, most individuals who would have qualified for Chapter 7 under the old law still qualify today.

Chapter 7 also allows you to surrender a vehicle without penalty or deficiency claims. If you cannot keep up with your car payment, you can turn the car over to your lender, incur no additional fees or penalties, and discharge the remaining loan balance.

Chapter 7 Income Requirements and Levels in Pennsylvania

Eligibility is based on median income for the state. There is a presumption that above a certain income you do not qualify for Chapter 7, but that is not absolute, because credits are given for things like mortgage payments, car payments, and child support. For a household of one in Pennsylvania, income of approximately $45,000 still qualifies for Chapter 7. For a family of four, the median income allowed is a little over $80,000. You may still qualify above those levels if you are entitled to those credits.

Chapter 13 Bankruptcy in Pennsylvania

Chapter 13 permits individuals to keep all of their property while making a monthly payment to creditors out of future earnings or income. The repayment plan, known as a Chapter 13 Plan, must be approved by the Court. In most cases a majority of unsecured debt is discharged, and payments are made on arrearages on secured loans such as mortgages, car loans, or tax debts. The written plan provides 36 to 60 months of payments to the trustee, who distributes them to creditors, and at the end of the plan you receive a discharge from the Bankruptcy Court.

Unlike Chapter 7, Chapter 13 is ideal for anyone behind on secured payments who cannot bring the accounts current without filing. Rather than negotiating with a secured creditor outside of bankruptcy, the Chapter 13 Plan forces the creditor to accept payment on the arrearages over a 36 or 60 month period. Chapter 13 may also be appropriate when your monthly income significantly exceeds your monthly living expenses, excluding payments to unsecured creditors such as credit cards. Like Chapter 7, Chapter 13 provides an automatic stay preventing all creditors from taking further action once the case is filed, and all creditor communication ceases.

When Chapter 13 May Benefit You

You are behind on payments for property you want to keep. For example, you are behind on your mortgage or car payments. The arrearages may be put into the plan so your original payment amount stays the same. In certain circumstances you may place the whole loan in the plan and reduce the total repaid on a car loan, known as a cramdown, which depends on factors including the value of the car.
You have tax debts that are not dischargeable. Under limited circumstances certain federal and state income taxes can be discharged, but in most cases they must be repaid, and Chapter 13 allows you to repay them over 36 or 60 months. Most, if not all, of the penalty will be forgiven under the plan.
You have significant unsecured debt but too much income for Chapter 7. Where credit card or medical debt is significant and your income disqualifies you from Chapter 7, a Chapter 13 Plan often significantly reduces what you pay to unsecured creditors.
You have non-exempt property you want to keep. If your home is worth significantly more than your remaining mortgage and home equity loans, or you hold significant liquid assets, you would have to give that property up in a Chapter 7. In Chapter 13 you keep the property and repay unsecured creditors who filed proofs of claim over 36 to 60 months, interest and penalty free. Like Chapter 7, Chapter 13 stops all mortgage foreclosure actions, utility shut-offs, lawsuits, and other creditor legal action.

What You Actually Pay in a Chapter 13 Plan

Bankruptcy is not a negotiation. What you pay is based on specific factors: a calculation of your monthly income and expenses, the type of debt you are paying, and the amount of non-exempt property you hold. The calculation is complicated, but your creditors must accept the payment as long as it adheres to the Bankruptcy Code. For example, you could have $85,000 in credit card debt and a Chapter 13 calculation that requires you to pay $250 a month for 60 months toward unsecured creditors, a total of $15,000. You would discharge $70,000 of unsecured debt, with no tax consequences on the discharged amount.

It is important to speak with a qualified professional before deciding whether Chapter 7 or Chapter 13 is right for you. At Young, Marr, Mallis & Associates, no legal advice is given except by a qualified bankruptcy attorney who can assess your situation and determine the remedies available to you. That consultation is free.

Using Bankruptcy to Stop a Mortgage Foreclosure in Pennsylvania

It is not uncommon to fall behind on mortgage payments. A medical condition, the loss of a job or income, or an unforeseen hardship can strain limited resources. A mortgage company may demand the full amount due after only a couple of missed months. Once foreclosure begins, the delinquency grows with attorney fees and other charges, and a homeowner can eventually lose the property at sheriff sale.

Chapter 13 is generally the preferred option for debtors concerned about foreclosure. When you file, you enter a reorganization plan to repay certain debts over three or five years, depending on what the bankruptcy court authorizes. That plan allows you to catch up on missed or delinquent mortgage payments, called arrears or arrearages, and can also reduce or wipe out the debts that caused you to miss those payments in the first place. Filing halts the foreclosure proceeding and stops any scheduled sheriff sale, and you resume monthly mortgage payments directly to the mortgage company while paying the delinquency through the plan.

Chapter 7 offers some protection through the automatic stay, which temporarily delays foreclosure proceedings and other collection actions. However, Chapter 7 does not allow a debtor to cure arrearages, which is why Chapter 13 typically offers greater protection against foreclosure despite Chapter 7’s speed and simplicity.

Short Sales and Loan Modifications

If you are a homeowner in Pennsylvania considering bankruptcy because of financial hardship, it may be appropriate to explore a loan modification, which can make your monthly payments easier to manage. A short sale may also be worth considering, since it can stop foreclosure of your home.

A short sale may be the best approach for a homeowner who owes more than the property is worth. In a short sale the borrower, or mortgagor, sells the property for less than the actual mortgage amount. The sale must be authorized by the lender, or mortgagee, which creates obstacles for homeowners without legal representation. An experienced bankruptcy attorney can negotiate a short sale for you and protect your interests and legal rights throughout.

Loan modifications can also help homeowners in financial difficulty. Depending on the situation and what the lender will agree to, a mortgage modification can make your mortgage more affordable by lowering the interest rate or extending the duration of the loan, resulting in smaller payments.

Tax Issues During Bankruptcy in Pennsylvania

Paying local, state, and federal taxes is a necessity, and outstanding tax obligations incur increasingly higher interest and penalties, creating a substantial burden. Bankruptcy can provide relief.

Overdue tax obligations can be paid through Chapter 13. A proof of claim filed by a taxing authority splits the debt into categories. The priority portion, usually the principal amount owed, must be paid in the bankruptcy, while part of the amount due may be classified as entirely unsecured and dischargeable.

In some instances taxes are completely dischargeable, but the petitioner must meet specific criteria: the debt must be income tax debt, the petitioner must have filed a legitimate tax return two years before filing bankruptcy, and the IRS must have assessed the return at least 240 days before the bankruptcy filing date.

Call Our Pennsylvania Bankruptcy Lawyers for a Free Legal Consultation

If you or a loved one is considering filing for bankruptcy in Pennsylvania, contact Young, Marr, Mallis & Associates at (215) 701-6519 to speak with an attorney. Consultations are completely confidential and your initial consultation comes at no charge. We will work with you to provide professional, experienced representation at a reasonable price, with payment plans to fit your budget. For decades we have provided aggressive, affordable bankruptcy representation to clients throughout Pennsylvania, and we can do the same for you. Get back on the path to financial success today.