Hearing the word “bankruptcy” and actually understanding what this means are two entirely different things. If you have any thought of filing for bankruptcy as a means of improving your financial situation, it would be in your best interest to learn more about the finer details.
Bankruptcy is a federal court process through which businesses and consumers are able to repay debt under the protection of the court or discharge some debt altogether.
Chapter 7 and Chapter 13 bankruptcy are most common. While many believe these to be almost identical, there are key differences to be aware of:
- Chapter 7 is a liquidation bankruptcy in which a trustee can sell any Non-Exempt property in order to repay debt. In most chapter 7 cases, there is no property for the trustee to sell. As outlined by bankruptcy laws in Pennsylvania, there is a substantial amount of property that is exempt from sale. With this filing, you can also discharge many types of debts.
- Chapter 13 is a reorganization bankruptcy. With this, you are able to keep your property but required by the court to pay back a certain amount of money on your debt, via a monthly repayment plan, which typically lasts three to five years. You generally pay back secured debt – meaning car and mortgage debt for property that you intend to keep. Other debts such as credit card debt, may be paid in full, in part, or not at all based on your situation. You can review your situation with an experienced attorney who can advise what will happen in your situation.
When you file for bankruptcy, an “automatic stay” will go into effect. This means that creditors are not allowed to contact you to collect any money for the time being. Since you don’t have to worry about calls and mail requests from creditors, you have time to focus on getting your financial situation in order.
Even though bankruptcy sounds like a simple way to discharge or reorganize debt, there are details of this process that must be considered:
- Some people do not qualify for Chapter 7 bankruptcy. This means you will not be discharging any debt, but instead reorganizing and paying some monies back on the debt prior to having it discharged.
- Some debts cannot be discharged through bankruptcy, including back child support, alimony, and student loans without a special action being filed.
If you are having a difficult time understanding the basics of Philadelphia bankruptcy or need assistance with the filing process, contact an experienced attorney. With the help of a bankruptcy attorney, you can determine if this process is right for you at the present time.