Request a Free Bankruptcy Consultation
If you have substantial credit card debt, a mortgage that you are behind your payments on, or an unsustainable second mortgage on your home, I can help you obtain relief through the bankruptcy code. Contact us for a free consultation. The goal of bankruptcy is to provide those with a high debt burden with a “fresh start.” There are two types of consumer bankruptcies which I’ll explain for you, Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy provides the debtor with a complete discharge of their debts without requiring the debtor to repay any of their unsecured debts. A Chapter 7 bankruptcy is not available to all debtors though. A Chapter 7 is only available to those who are unable to pay their creditors after deducting their basic living expenses. A Chapter 7 bankruptcy uses the means test to determine which debtors are eligible to file a Chapter 7.
If your income is below the median income in Pennsylvania for your household size, you automatically qualify. For an individual, this amount is currently $47,809. For a household of two, the amount is $56,690. For a household of three, the amount is $71,119. For a household of four, the figure is $83,162. An additional $8,000 is added for each additional dependent in your household. If your income exceeds this amount, you may still be eligible for a Chapter 7 after an analysis of your income and allowable expenses is conducted. Feel free to contact me to discuss your eligibility. Call me at (484) 362-9286.
Under a Chapter 7, a debtor’s assets could potentially be sold in order to pay their creditors. However, the bankruptcy code provides several exemptions which a debtor may use to receive a discharge without having to surrender any of their property. For example, a debtor can exempt up to $20,200 in equity on their home, $10,775 worth of household goods, and $3,225 for a vehicle. Additionally, if the home-equity exemption isn’t used, a $10,125 “wild card” exemption may be used to exempt any property such as a second vehicle. Further, retirement benefits such as a 401(k) or a pension are untouchable in bankruptcy.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy establishes a payment plan for the debtor over a period of three to five years. The main benefit of a Chapter 13 bankruptcy is that it permits the debtor to reorganize their debts. This is particularly important when the debtor’s home is their main concern. If you have fallen behind on your mortgage, but wish to keep your home and prevent foreclosure, you may want to consider a Chapter 13 bankruptcy.
A Chapter 13 bankruptcy would permit you to pay the arrears on your mortgage over a period of three to five years so you can get caught up while continuing to make your regular monthly mortgage payments. If you have a second mortgage on the property and the second mortgage is completely unsecured, meaning the first mortgage is more than the value of your home, then you could use a Chapter 13 bankruptcy to “strip” the second mortgage and remove it from the property. This can relieve you of a huge debt burden created by the existence of a second mortgage on the property.
A Chapter 13 bankruptcy establishes a payment plan where a portion of a debtor’s debts are paid over a period of three to five years. Once a payment plan is established, the payment plan must be approved by the court. If the debtor completes the plan and makes all payments on time, any arrears on the debtor’s home would be satisfied and the remaining portion of other unsecured debts such as credit cards would be discharged.
Questions About Bankruptcy?
If you have questions or are interested about filing bankruptcy, please contact me at (484) 362-9286. Zachary Zawarski is a bankruptcy attorney practicing in the Lehigh Valley. His office is conveniently located in Bethlehem, PA.
Our attorneys are considered Debt Relief Agents and our firm is a Debt Counselling Agency.