What is bankruptcy?

According to Merriam Webster, it is the status of a debtor who has been declared by judicial process to be unable to pay his or her debts.

In everyday language, bankruptcy is a process put in place by the federal courts to help individuals and businesses that are under severe financial strain to either eliminate (liquidation, as in Chapter 7 Bankruptcy) or repay (reorganization, as in Chapter 13 Bankruptcy) their debt.

The bankruptcy code is based on reasonableness so it makes sense that if you do not have enough income to pay back any of your debts, they should be forgiven like in a Chapter 7 bankruptcy case. It also makes sense that if you make enough money to pay back some of your debts but not enough to pay back all of your debts, you should be required to make manageable sized payments for a reasonable period of time and have the rest of the debt dismissed, like in a Chapter 13 bankruptcy case

How long does bankruptcy take?

Chapter 7 bankruptcies will be over in a matter of months (from 3 to 5 months depending on how busy the Clerk’s Office). A Chapter 13 bankruptcy can take from 3 to 5 years depending on your income and the pay back schedule. Although Chapter 13 does take a period of years, most clients who are catching up on mortgage payments appreciate the 5 years to give them the time that they need.

Do I have to disclose all of my assets?

You should be completely open and honest with your bankruptcy attorney while discussing your assets. Concealing assets from a bankruptcy court is a federal crime, and it can land you in some real trouble. Not only are you required to disclose assets, but you will also need to disclose any property transfers that took place, sometimes as far back as a few years. Honesty is always the best policy.

What is a bankruptcy trustee?

During the filing process, a trustee will be assigned to your case. A trustee is simply a lawyer whose job it is to review your case for any errors or omissions and to evaluate whether you have listed all of your property on your paperwork.

During the trustee meeting you will be asked a series of yes or no questions while you are sworn to tell the truth. Your bankruptcy attorney will prepare you for the questions that will be asked so there is no reason to feel nervous about the trustee meeting. For most clients this is the one and only time that they will be setting foot in the bankruptcy courthouse. They will never have to go to an actual courtroom as the trustee meetings.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

If you are currently considering filing for bankruptcy, the licensed bankruptcy attorney at Seelinger Law will help you make a wise decision about which route you should go. (Call now or contact us online for your free consultation!)

Chapter 7 Bankruptcy is the most common route, and there are several reasons for this. With Chapter 7, you are not required to pay back any portion of your dischargeable debt, you can get the discharge that you are seeking in a matter of months, and you have less court involvement.

All of these reasons make a very strong case for using Chapter 7 to get out of debt and start enjoying your life again.

Beware of bankruptcy attorneys who try to steer you toward a Chapter 13- understand that bankruptcy attorneys are paid more money for a Chapter 13 than a Chapter 7.

Chapter 7 bankruptcy is much easier than Chapter 13 in terms of court appearances, paperwork, and the length of the case/time invested. Under a Chapter 7 Bankruptcy, an individual or business is asking the court to eliminate, or discharge, all of their debt.

Under a Chapter 13 Bankruptcy, you submit a plan to the court showing how you plan on repaying your debt. In this case, some debts may be discharged, while others may have to be paid partially or in full.

Chapter 7 Bankruptcy is the most common route, and there are several reasons for this. In general, it takes care of all of the problems that caused you to think about filing for bankruptcy in the first place. Chapter 7 will stop creditors from harassing you, stop wage garnishment, repossession and foreclosure and it is faster, less expensive, and easier, and it boasts a higher success rate than Chapter 13. Chapter 7 will stop creditors from harassing you, stop wage garnishment, repossession and foreclosure and it is faster, less expensive, and less invasive. With Chapter 7, you are not required to pay back any portion of your dischargeable debt. 

Although the filing fees are comparable between a Chapter 7 and a Chapter 13, the attorney fees are considerably less expensive in a Chapter 7. You also need to take into account the fact that in a Chapter 13, you would be required to repay a portion of your debt, making monthly payments for a three or five year period. When you total these together, you will see that it is far less expensive for you to file Chapter 7 where you are not required to pay back any portion of your dischargeable debt. This is actually the very reason that most people do file for Chapter 7 instead of Chapter 13. Although there are many advantages, the total debt discharge is probably the most popular reason. Beware of bankruptcy attorneys who recommend a Chapter 13 to you when you have a low income and are not behind on your mortgage payment; some attorneys push people to choose a Chapter 13 as they will get paid more money in the long run.

At Seelinger Law we pride ourselves on our honesty and sincerity in dealing with clients. Recognizing that we are the bankruptcy experts, we use our moral compass to guide you toward the best option for your particular case. We understand that each case is different and we take a sensitive and caring approach with our clients. We will help you make the best decision for you.

Do I get to choose which type of bankruptcy I am filing?

In order to be eligible for Chapter 7, you do need to meet certain income requirements. If you make too much money, you will still be eligible for Chapter 13. Other than the income requirements, there are asset restrictions where you are not allowed to have over a certain amount of equity in property. Your licensed bankruptcy attorney will be able to advise you after your first meeting which as always is a FREE CONSULTATION.

What are the income requirements for filing Chapter 7 Bankruptcy?

The median income for you state will generally be the qualification for eligibility. If you fall within the income limit, then you will most likely be eligible. If you do not fall within the income limit, you may still be able to file Chapter 7. Your attorney will want to know how many people are in your household and your monthly expenses. Some people may be over the median income for their household size but perfect candidates for Chapter 7 because of their high medical expenses. Ask your attorney before deciding that you are not eligible.

What is a “means test”?

The means test is meant to keep high income earners from being able to have access to the benefits of Chapter 7 bankruptcy. It is a numeric test that your attorney will do for you based on your income and ability to pay off some of your unsecured debt. If your income is lower than your state's median income, then you have already passed the test and you are eligible to file for Chapter 7. If your household income is higher than the average income in Pennsylvania for your household size, you may still pass the means test if your expenses are high. Your attorney will be adept at factoring in the types of expenses which are used in the means test to determine whether you have any disposable income to pay your creditors. If you make $100K or are considered a high income filer with no children or medical issues, you can still take advantage of your bankruptcy rights under a Chapter 13 repayment plan. Remember that you will not be required to pay back the majority of your unsecured debt under Chapter 13.

Rest assured that Seelinger Law is confident that we will be able to protect your tax refund and still allow you to get that fresh financial start. Pre-petition asset planning is just one of the great benefits that you will get as part of your free consultation.

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