Bankruptcy 101: The Ultimate Guide to Bankruptcy in PA
Overwhelming debt can quickly become too much to bear. Creditors won’t stop calling and the stress of trying to make ends meet is never easy. Thankfully, there are many debt relief options available that can help people get a fresh start.
Bankruptcy is one of the most common debt relief options that has helped millions of people become debt-free. If you are considering filing for bankruptcy, here is what you need to know.
What Are the Most Common Types of Bankruptcy Chapters?
There are different types of bankruptcy chapters that individuals and businesses can apply for to eliminate their debt. The most appropriate bankruptcy chapter for a particular case is determined by an individual’s specific financial situation. The two most common types of bankruptcy are Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 allows the filer to achieve financial freedom from debt in the most efficient way possible by eliminating most types of unsecured debts. Unsecured debt is debt that is not attached to a material form of collateral. Chapter 7 is one of the most common forms of bankruptcy because it can wipe out qualifying debt in as little as four months (depending on the filer’s case).
How Do You Qualify for Chapter 7 Bankruptcy?
To qualify for Chapter 7 bankruptcy, the filer must pass the qualifying means test. The means test is designed to weed out individuals who have the financial capability to repay some meaningful portion of their debt in a Chapter 13 bankruptcy.
Chapter 7 bankruptcy can eliminate debts such as:
- Credit card debts
- Medical bills
- Personal loans
- Payday advances
- And more
Chapter 13 bankruptcy often allows the filer to simply pay however much the filer can afford to pay towards the debt. Those payments would occur over three to five years. Instead of having to make separate payments to all creditors, this bankruptcy chapter allows you to make one manageable monthly payment.
With Chapter 13 bankruptcy, you could end up discharging some debts while obtaining more time to pay off others. Most people that file a Chapter 13 bankruptcy do not repay all of their debt. Instead, they repay just a portion of it, while discharging some of the debt that they are not able to afford to repay.
How Do You Qualify for Chapter 13 Bankruptcy?
To qualify for Chapter 13 bankruptcy, you will need to demonstrate that you have enough regular income to fulfill your three-to-five-year payment agreement. For the most part, Chapter 13 bankruptcy can eliminate the same types of debt as Chapter 7 bankruptcy (after the repayment plan is fulfilled), and in some cases, it can eliminate the debt that doesn’t qualify in Chapter 7.
Chapter 13 bankruptcy can be beneficial for individuals who:
- Want to protect their home from foreclosure
- Have a monthly income that is too high to qualify for Chapter 7 bankruptcy
- Want to keep their property or assets that may be liquidated in a Chapter 7 bankruptcy
- Want to repay tax or other debt through an affordable payment plan
Bankruptcy’s Automatic Stay
The automatic stay in bankruptcy is a temporary federal injunction that immediately stops most collection efforts for a specific period of time.
The automatic stay is a powerful bankruptcy tool that can stop:
- Foreclosure proceedings
- Garnished bank accounts
- And creditor harassment
If you are about to be evicted from your home or are facing repossession of your vehicle, an automatic stay may be able to help you. It can give you the time you need to get your financial situation back on track.
Let Us Put 40+ Years of Combined Experience on Your Side
Filing for bankruptcy is a complex process that requires extensive knowledge and experience. If you want to achieve financial freedom, you should consider having an experienced attorney on your side to guide you through the bankruptcy process.
An attorney can also analyze your situation and help you determine which bankruptcy chapter is right for you. Failing to complete the bankruptcy filing process accurately can affect the outcome of your case.