Filing for bankruptcy is a legal procedure where a person who is unable to pay his or her bills may acquire a fresh financial start. This is a right that the federal law provides therefore all cases are to be handled in federal court. Since it may involve many complexities that the person in debt may have a hard time fathoming at such a point, it would be wise to hire a Pennsylvania bankruptcy lawyer to help sort things out. A Pennsylvania debt assistance expert can make this process easier.
The debtor, or person filing for bankruptcy, may get most of his or her bills wiped out. They may be allowed to keep most or all of their property that would have been lost to creditors, had they not filed for bankruptcy. This also provides them with extra time to pay for bills. That is, if they have a regular source of income.
There are 2 Types of Bankruptcy
Before we talk about the types of bankruptcy, it would be wise to check the Court Locator to ensure that those who choose to file for this procedure do so in the right court.
Moving on, there are two types of bankruptcies namely:
Chapter 7 (Straight Bankruptcy)
A bankruptcy case filed under Chapter 7 will require the debtor to file a petition where you are asking the court to discharge your dents. Therefore, you would ask to do so in exchange for property. Please keep in mind that this exempts properties that the law permits you to keep. This may include much, if not all, of your property. Those that are not exempt will be sold and the proceeds will go to the creditors.
A Chapter 13 bankruptcy case is filed when the debtors has a plan to show how he or she will pay off past and current due debts over an extended period of time. This will normally take 3 to 5 years. Once the debtor completes the plan, any balance due will be erased or wiped out.
Many debtors prefer this as it lets them own their homes which they might be in danger of losing due to financial hiccups. Chapter 13 bankruptcy is popular for those who are behind in payments but can regularly pay for more important debts, within a decent span of time. This is also preferred by those who have regular income.
The Cost to File For Bankruptcy
At present, the cost to file for bankruptcy is $335 for Chapter 7 and $310 for Chapter 13 bankruptcy. The same rate applies for one-person bankruptcy and for married couples. You may pay for it in installments if you are unable to pay for the whole sum at once. Please note that for those whose income is quite low or up to 150% of poverty, the court may waive the Chapter 7 filing fee.
How Bankruptcy Affects the Debtor’s Life in General and Finances
If a debtor files for bankruptcy, this will appear on his or her credit record for 10 years. The good news is that by wiping out the debts, this may help debtors receive credit.
Utility companies cannot cut off service to debtors who have filed for bankruptcy. With regards to work, government agencies and employers are not allowed to discriminate against individuals who have file for bankruptcy.
Those who have lost their driver’s license because they were unable to pay court-ordered civil damages due to an accident will be able to get their license back. However, please note that people who have co-signed a loan with the debtor may have to pay for any loans they co-signed.
What Property Can Debtors Keep?
As mention earlier, the court allows debtors to keep property that is exempt from creditor claims. The debtor may choose between exemptions under the federal law or Pennsylvania law. Most people choose the federal exemptions.
According to federal law, a debtors may keep:
• $23,675 in home equity (This is the value of the debtor’s property minus the amount they currently owe on mortgages and other dues.)
• $3,775 car equity
• $600 per household goods or up to a total of $12,625
• $2,375 in tools needed for the debtor’s job (This includes tools, books, etc.)
• $1,600 worth of jewelry
• $1,250 in any other property and up to $11,850 of any unused exemption in the debtor’s home
• the debtor still has rights to receive benefits like unemployment compensation, social security, veterans benefits, pensions and even public assistance—regardless of the amount.
Please note that married couples enjoy doubled exemptions if they file for this together.
Creditors and Security Interest
Some creditors may have security interest on your personal property or home. Therefore, if the debtor gives the creditor mortgage his or her property or home as collateral they can take or sell the property.
If you wish to keep collateral property, Chapter 13 can give you time to catch up on your payments, if you are behind. Certain types of property can be kept if the debtor pays the creditor what the property is worth, instead of the debt itself. Those who use household goods as a form of collateral to their loans may keep them without paying the debt.
What Debtors Can Own After Bankruptcy
Most people think that they cannot own anything after bankruptcy. This is not the case. Please keep in mind however, that debtors who receive an inheritance, life insurance benefits or a property settlement will have to give those up to pay creditors in certain cases. This occurs when the money or property is not exempt or if it has been accepted 180 after the debtor filed for bankruptcy.
Types of Debts That Are Not Wiped Out
A person who files for a Chapter 7 bankruptcy will still have to pay for certain things like child support, property settlements, alimony, criminal restitution, fines, some types of taxes and miscellaneous debts. They will also pay for debts that they failed to list in the bankruptcy petition but a good Pennsylvania bankruptcy lawyer knows there are exceptions to this rule.
The debtor will also have to pay for debts caused by willful and malicious harm, loans made using fraud, debts due to personal injuries and deaths caused by DUIs and debts to pay for taxes. Student loans may be wiped out if they are considered an undue hardship.
With regard to Chapter 13 bankruptcy, some of these debts may be wiped out. A person who would like to amend his or her bankruptcy form can find the details of how to do so here.
What Is Discharge?
The last thing a court grants a debtor is a discharge. This allows the debtor to stop paying for all debts except for the ones that are not exempted. Please note that the court may refuse to grant a discharge in cases where the debtor tries to cheat creditors, refuses to obey a court order or provides false information.
The Discharge Order is very important to debtors. This order stops creditors from trying to collect debts that have been considered discharged.
Debt is something that can weigh people down emotionally as well as physically. If you are currently thinking about filing for bankruptcy in Pennsylvania, it would be best to consult with a Pennsylvania bankruptcy lawyer to help you get through this trying period in a speedy manner.