Bankruptcy

Questions and Answers

 

The moment a debtor files a case under Chapter 7 or Chapter 13, federal law operates to automatically stay collection action against the debtor.

Question Category
Chapter 7 Chapter 13

Chapter 7

1What are Chapter 7 insolvency proceedings?

If you are overwhelmed by credit card debt, past-due medical bills, and other burdensome expenses, filing for Chapter 7 bankruptcy may be a way for you to get some relief from creditors and obtain a “fresh start” with your life. Individuals may file for relief under either Chapter 7 or Chapter 13. You should consider filing for protection under Chapter 7 for the following reasons:

- The proceedings are shorter in duration

- The proceedings are less expensive

- The proceedings provide maximum value to the individual

2What debt can be discharged in a Chapter 7 bankruptcy proceeding?

If you qualify for Chapter 7 bankruptcy, you may be able to receive a discharge for most of your debts. This means that creditors cannot continue to dun you, call you, and send you letters.

Some debts that may be discharged are:

- Credit cards

- Medical bills

- Deficiency judgements

- Some personal loans

-Some judgments

- Personal liability as guarantor for another's debt

Some debts the may not be discharged are:

- Student loans

- Marriage settlement agreement obligations

- Child Support

- Other domestic obligations

- Court fines and costs

- Some tax obligations

- Some debts incurred through criminal behavior

It is important to note that there are strict income limits to qualify for Chapter 7 bankruptcy insolvency proceedings. To learn more about whether you qualify for protection under Chapter 7, please contact our office.

3What information does our firm need from you for a Chapter 7 consultation?

Filing for bankruptcy requires a lot of time, planning, paperwork and effort. It will help our firm greatly if you gather the following information ahead of your initial consultation:

- A list of creditors and the amount you owe them

- A recent credit report from Experian, Equifax or Transunion.

- All sources of your income, as well as how often you are paid

- Pay stubs from the past six (6) months

- Bank records from the past six (6) months

- A list of your assets

- A list of your monthly expenses including expenses for your dependents

4How Does Chapter 7 Bankruptcy Work?

The first step in a Chapter 7 bankruptcy case Is to meet with an attorney to determine whether you qualify for this type of bankruptcy. There are strict income limits that are based on Pennsylvania’s median income level and implications from the “means test” which are both used to determine whether you may be eligible or whether you should consider filing for protection under a different bankruptcy chapter.

If you decide to move forward, below is the general process for a Chapter 7 bankruptcy:

- You complete a course in credit counseling

- You file a petition with the Bankruptcy Court

- You file any needed additional documentation

- The Bankruptcy Court appoints a trustee

- The trustee holds a meeting of creditors

- Then, barring no objection or intervention, the Bankruptcy Court will in most cases issue a discharge order approximately 60 to 90 days after the creditors meeting.

To prove his or her case, the debtor must be an honest, but unfortunate, debtor. The debtor could be denied a Chapter 7 discharge if, for instance, he or she did not keep or provide adequate financial records, adequately explain loss of assets, committed a bankruptcy crime and/or fraudulently transferred, hid or destroyed property that should have been turned over to the bankruptcy trustee.

Chapter 13

1What are Chapter 13 insolvency proceedings?

If you are in danger of losing your home to foreclosure or having your motor vehicle repossessed, you may want to consider filing for Chapter 13 bankruptcy protection. Filing for Chapter 13 protection can be done in emergency situations or as planned maneuvers. The goal of a Chapter 13 bankruptcy is to give the honest, but unfortunate, debtor a break from creditors while all parties work on a realistic and achievable repayment plan.

Some of the benefits of filing for Chapter 13 bankruptcy include:

- The proceedings stop foreclosure against your home

- The proceedings stop repossession of your primary vehicle

- The proceedings provide relief from collection phone calls and letters

- May allow for stripping off of unsecured junior mortgages

- May allow for impairment and discharge of other obligations

A Chapter 13 bankruptcy case is also known as a “wage earner” case. The debtor uses steady income to propose a plan to pay all or a portion of their debts. These plans may last up to five years.

In general, the process for filing a Chapter 13 bankruptcy includes:

- You determine whether you fall within the debt limits

- You file a petition with the Bankruptcy Court

- You file any needed additional documentation

- You file an individualized plan for making payments

- You attend a two-hour financial management course

- You attend a meeting of creditors

- You attend proceedings needed to confirm the proposed plan

- You execute the plan

If the Court does not confirm the plan, the debtor may choose to file a modified plan or convert the case to a Chapter 7 liquidation proceeding. If the Court confirms the plan, and once the debtor completes the plan, the Court grants the debtor a discharge of the remaining debt.

2What Do You Need to Know About Payment in a Chapter 13 Plan?

A Chapter 13 payment plan will span three to five years, depending on how the monthly income compares to the median income. Here are some factors to consider when working on a Chapter 13 bankruptcy plan:

- If you are keeping your house, the mortgage will be paid through the plan (not paid directly to the mortgage holder)

- You may decide to surrender your vehicle or make payments through the plan

- Priority claims (certain taxes, domestic support, attorney fees, court costs, etc.) must be paid in full without interest over the life of the plan

- Creditors must be paid at least as much as they would have received in a Chapter 7 case

- You must devote your disposable income to the Chapter 13 plan for the duration of the plan. Disposable income is generally calculated by tabulating your household income for the prior six months and deducting various allowed expenses.

3What information does our firm need from you for a Chapter 13 consultation?

Filing for bankruptcy requires a lot of time, planning, paperwork and effort. It will help our firm greatly if you gather the following information ahead of your initial consultation:

- A list of creditors and the amount you owe them

- A recent credit report from Experian, Equifax or Transunion.

- All sources of your income, as well as how often you are paid

- Pay stubs from the past six (6) months

- Bank records from the past six (6) months

- A list of your assets

- A list of your monthly expenses including expenses for your dependents

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Any questions? Contact me.