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What Happens When You File For Bankruptcy In Pa

Eastern District Of Pennsylvania Requirements

Filing Chapter 13 Bankruptcy in Pennsylvania

The Eastern District is divided into two divisions with courthouses in Philadelphia and Reading. The Philadelphia division handles cases for Bucks, Montgomery, Delaware, Philadelphia, and Chester counties. The Reading Division takes care of cases out of Berks, Lehigh, Northampton, and Lancaster counties. There are no special local forms required for a Chapter 7 bankruptcy case in this district, but the court has specific formatting requirements for your .

How Does Filing Bankruptcy Impact Credit

Your credit may not be in tip-top shape by the time you consider filing for bankruptcy, since high balances and missed payments are the top factors affecting your credit score. Still, the presence of a bankruptcy on your credit report will severely impact your credit scores and creditworthiness the entire time it is on your report. That impact will lessen as time passes, however. Chapter 7 bankruptcy remains on your report for up to 10 years, and Chapter 13 stays there for up to seven years.

It’s not an ideal credit situation, of course, but you can use the time to manage your debts wisely and make consistent on-time payments. Like with any damage to your creditworthiness, it’s possible to rebuild your credit with some focus and patiencealong with using the debt relief provided by the bankruptcy to get back on track financially.

Can You Discharge Your Back Income Taxes In Bankruptcy

Yes, in many cases you can discharge your back federal, state, and local income taxes in bankruptcy. However, the taxes must have come due three years or more before filing for bankruptcy, you must have filed the returns two years or more before bankruptcy, and the taxes must have been assessed within 240 days of the bankruptcy or not at all. For more details on taxes and bankruptcy, see our blog post âYou Can Discharge Income Taxes In Bankruptcy

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How Often Can You File For Bankruptcy

The frequency of applying for bankruptcy depends on which type of bankruptcy youre filing, something known as the 2-4-6-8 rule. Heres a breakdown:

  • Filing Chapter 13 after Chapter 13: two years.
  • Filing Chapter 13 after Chapter 7: four years.
  • Filing Chapter 7 after Chapter 13: six years.
  • Filing Chapter 7 after Chapter 7: eight years.

Filing Chapter 13 immediately after Chapter 7 is also referred to as Chapter 20 bankruptcy. You wont receive a discharge when filing Chapter 20, since you arent waiting the full four years between Chapter 7 and Chapter 13, but this type of filing could give you the time you need to pay down debt.

Filing For Bankruptcy In Pennsylvania

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Bankruptcy is a federal process so it works the same way in every state. However, you’ll use Pennsylvania state law to protect your property. Although most states don’t allow filers to choose bankruptcy exemptions, Pennsylvania filers are fortunate because they have two choicesthe state or the federal exemption system. You’ll want to review each list carefully and compare it to the property you own because you can’t use exemptions from both lists. If you decide to use Pennsylvania’s state exemptions, you can also use the federal nonbankruptcy exemptions.

Our Exemption Analysis. Pennsylvania’s exemptions don’t protect as much property as other state exemptions, and most filers will do better using the federal bankruptcy exemptions. However, if you have significant equity in real estate held as tenancy by the entirety, you might be able to protect the entire property if only one spouse files for bankruptcycheck with a local bankruptcy attorney.

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How Bankruptcys Automatic Stay Protects Against Foreclosure

Its ironic that bankruptcy is associated with foreclosure because a core component of bankruptcy called the automatic stay actually protects filers against foreclosure. So what is the automatic stay, and how does it work?

The federal judiciary supplies the following definition of the automatic stay:

  • An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

It may sound too good to be true, but theres a very specific reason for the automatic stay to exist. Its purpose is to give debtors some breathing room so that they can get their financial affairs in order while the bankruptcy case is in progress. Without the benefits afforded by the automatic stay, ceaseless collection actions could undermine cases by continually interfering with the debtors ability to get a fresh start. is also prohibited by the Fair Debt Collection Practices Act .

If You Do Not Live In England Or Wales

The process to become bankrupt is different if you live in Scotland or Northern Ireland. You cannot apply to become bankrupt in England or Wales.

You might be able to apply if you live anywhere else – talk to a debt adviser.

You must not break the bankruptcy restrictions in England or Wales. These might also apply outside England and Wales – check the laws of the country you live in.

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What Is Foreclosure Defense

If your lender has filed or is threatening a foreclosure action, mortgage foreclosure defense is a possible alternative to bankruptcy. Foreclosure defense can help keep you in your home by raising legitimate defenses to a foreclosure action . Many lenders have wrongfully foreclosed upon homeowners, engaged in predatory lending practices, and made egregious mistakes in both setting up the mortgage loan and foreclosing on the homeowner. Mortgage defense is about forcing the banks to follow the rules. For more on foreclosure defense, see âForeclosure Defense and Bankruptcyâ in our âStopping Pennsylvania Foreclosureâ series. > > More

What Is The Bankruptcy Means Test

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To qualify for Chapter 7 bankruptcy, your average gross income for the last six months must be below the state median income for your family size. If your income is above the median, you must take a âmeans testâ to determine if, after taking into account your allowable expenses, you qualify for Chapter 7.

The means test is not as ominous as it sounds, but it is complex and must be completed very carefully to avoid complications down the line. We can help you determine if you qualify for Chapter 7. If you do not qualify for Chapter 7 after completing the means test, you may still be eligible for Chapter 13 bankruptcy. For more information on means testing, see our post on High-Income Chapter 7. > > More

Quick Note: Social Security benefits do not count towards the means test, although they do count as current income.

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S In A Pennsylvania Bankruptcy

We all know that seeing the forest helps us recognize the trees, so it’s probably a good time to consider the significant steps you’ll take during your bankruptcy journey. Think of this checklist as a roadmap of sorts, but you can also use it to track your progress. The good news? You’ve already made headway on the first two items!

Chapter 7 Vs Chapter 1: The Difference

Most people tend to file bankruptcy under Chapter 7 because its easier and the preferred option for people with few assets and no income. For some that still have income, Chapter 13 is a better option to catch up with their payments and keep their valuable assets.

In Chapter 7, its when you claim that you dont have any disposable income to pay off your debt. So, if you want to eliminate your debt, your assets will be seized and sold off so that you can pay a portion of your debt.

In Chapter 13, you have the option to keep all your assets, regardless of their value. Its when you enter into a debt repayment plan, so as long as you can keep up with the payment to your creditors, your properties are safe.

Its normal to fear losing your home after you file bankruptcy. Your house, though, can be exempt depending on how much its worth if you file Chapter 7 bankruptcy. However, you need to be current in your mortgage payments to keep your house.

The exemptions vary from state to state. In some cases, you can keep your house and some of your assets because their equity is lower than the bankruptcy exemption amount, which well explain more in the following sections.

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Federal Vs Pennsylvania Exemptions In Chapter 7

Another drawback is that when you file for bankruptcy, you must choose between the federal and the Pennsylvania exemptions. You cannot mix and match them. Overall, the federal exemptions afford a debtor greater protections. However, if your house has substantial equity, the Pennsylvania exemptions might be more beneficial.

When preparing to file Chapter 7 or Chapter 13, it is critical to have an accurate appraisal of the value of your home, an idea of your current mortgage balance, and a detailed accounting of all of the debt you owe. Our experienced Pennsylvania Chapter 7 bankruptcy attorneys will thoroughly review all of your information to assist you in filing for the chapter of bankruptcy that is right for your situation.

How Often Can I File For Bankruptcy In Pennsylvania

What Happens if You Get Sued

Technically you can file for bankruptcy as many times as you wish. However, there is a difference between filing for bankruptcy and having a bankruptcy discharged or even dismissed. Filing is only the first step.

A discharged bankruptcy means that the debtor is no longer responsible for their debts such as personal loans or credit card bills. However, a bankruptcy can be dismissed, making the debtor liable for all of their debts.

When you file for Chapter 7 or Chapter 13 bankruptcy protected by a court order, referred to as an automatic stay, it temporarily blocks collection actions while the bankruptcy is in effect. Filing multiple times can virtually neuter the power of the stay, depending on the timing of filings. One exception exists where a court grants an extension, making the stay only last for 30 days if the debtor files for bankruptcy more than once in a year.

Filing more than once for a Chapter 7 bankruptcy means your second case cannot be discharged for at least eight years after the date of the filing of the original Chapter 7. Filing more than once for a Chapter 13 bankruptcy means your second Chapter 13 cannot be discharged for at least two years after the date of the first filing.

The attorneys at Melaragno, Placidi & Parini can explain the exceptions to you in greater depth and provide you with enough information to determine what would best suit your circumstances. Although you can file multiple times, the timing on filing needs to be well thought out.

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Dealing With Your Car

If your car is paid for, youâll be able to keep it as long as you can protect its full value with an exemption. The federal bankruptcy exemptions have a specific motor vehicle provision, but the Pennsylvania bankruptcy exemptions donât. So, if you have nonexempt equity in your motor vehicle, the federal bankruptcy exemptions may be better suited for your case.

If youâre still paying on your car loan, youâll have to let the bank and the court know how you want to handle the debt. Unlike credit card debt or medical bills, which are an unsecured debt, if you stop making payments on a secured debt like a car loan, youâll face a repossession plus a possible lawsuit for whatâs left owing on the loan.

Filing bankruptcy under either Chapter 7 or Chapter 13 of the Bankruptcy Code gives you the ability to walk away from your car and car loan. The bank takes the car to sell it at auction and the bankruptcy court erases your obligation to keep paying on the loan.

If you want to keep the car you can do so as long as youâre current with your car payments. Youâll get to decide between signing a reaffirmation agreement to keep everything essentially the same and a redemption. For a redemption, youâll need to pay the bank the current fair market value of your car in exchange for a clean title. The loan balance will be eliminated by the bankruptcy discharge. Check out Can I Keep My Car If I File Chapter 7 Bankruptcy in 2020? in Upsolveâs Learning Center for more.

If My Circumstances Have Changed Can I Make Changes To My Chapter 13 Plan

Yes. A Chapter 13 Plan is just that. A plan. Most Chapter 13 Plans filed in Pennsylvania will need to be changed in order to match the number of claims that were filed. At the beginning of a case, it is very difficult to predict the exact amount of priority, secured and unsecured claims that will be filed in your case. A good bankruptcy attorney can have a pretty good idea of the claims that are expected based on what you tell him or her but it is very difficult to have an exact amount.

For example, you may be listing that you owe too much in priority taxes and are proposing to pay back more than you owe. Or you may tell your lawyer that you are in arrears on your mortgage by $8,000 when in reality you are back on the mortgage in the amount of $10,000.To account for the difference your lawyer can file an A new 13 Plan which either increases or decreases the number of your plan payments. If you change the plan before the case is approved by the Bankruptcy Court you are filing what is called an Amended Plan. You do not need the Courts permission to file an Amended Plan.

If your case has already been approved and you want to change the plan, a Motion to Modify the plan is filed with the Court. Typical examples of cases in which you may want to file for a change in payments after the case is approved include cases in which the mortgage company gives you a loan modification when your new mortgage includes all of the amounts that you are behind on the mortgage.

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Tips Before Filing Bankruptcy In Pennsylvania

Bankruptcy can erase your debts, stop creditors from contacting you, and give you opportunities to prevent your car from being repossessed or your home from being foreclosed on. By stabilizing your finances, bankruptcy can also give you more freedom to start building good credit for your future. If you live in Pennsylvania, and you have spent months or years struggling to pay off your debts, filing bankruptcy may be the first step to turning your financial life around.

While bankruptcy can have tremendous benefits when executed carefully, the process can be confusing and difficult, especially if it is your first time filing for bankruptcy in Pennsylvania. The bankruptcy tips contained in this guide can help make the process easier and simpler. Bankruptcy is a major decision with long-term effects, so it is crucial to review your options with an experienced bankruptcy attorney before you file.

To learn more about tips on bankruptcy, the bankruptcy process, the benefits of bankruptcy, or other aspects of bankruptcy law in Pennsylvania, call the Philadelphia bankruptcy lawyers of Sadek and Cooper Law Offices, LLC at 545-0008 for a free and confidential consultation. Proudly serving Philadelphia, Bucks, Montgomery, and Delaware Counties, our attorneys handle Chapter 7 cases, Chapter 13 cases, and can also help you explore various alternatives to bankruptcy.

What Bankruptcy Exemptions Apply To My Car

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Exemptions are the provisions of the US Bankruptcy code excluding or exempting a certain amount owed out of the bankruptcy process. This means the property will not be liquidated or sold as part of the bankruptcy process. If the exemption analysis is done correctly, then you will not have to lose the qualifying property you own. A skilled Allentown bankruptcy attorney will help you navigate through that part of the process.

When an item is exempt, this usually means that it will not be sold or liquidated as part of the bankruptcy proceedings. Skilled bankruptcy attorneys usually claim exemptions at the outset of the bankruptcy filing. An experienced bankruptcy attorney will be able to give you a heads up on the exemptions and about the repercussions of this analysis in your property interests.

In the case of your car there are three important exemptions:

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Will I Have To Go To Court If I File For Bankruptcy

Generally, you do not have to go to court during your bankruptcy. However, you must attend a âmeeting of creditorsâ conducted by the bankruptcy trustee in your case. The trustee is not a judge, and the meeting is relatively informal and brief. At that meeting, which your attorney will attend with you, the trustee will ask some questions regarding your bankruptcy petition, schedules, and other documents. Although creditors may attend the meeting and ask questions, it is unusual for them to do so in the typical bankruptcy case. Your attorney will prepare you for the meeting, so there is no need to be nervous about it. > > More

How Does Bankruptcy Work

Bankruptcy is a method to eliminate or at least reduce your debt when bills pile up beyond your ability to repay them. It should be viewed as a last resort to be considered only when all other potential courses of action to get back on track have been exhausted.

Individuals filing for bankruptcy mostly use either Chapter 7 or Chapter 13. The biggest difference between the two is what happens to your property:

  • Chapter 7, which is known as liquidation bankruptcy, involves selling some or all of your property to pay off your debts. This is often the choice if you don’t own a home and have a limited income.
  • Chapter 13, also known as a reorganization bankruptcy, gives you the chance to keep your property if you successfully complete a court-mandated repayment plan that lasts between three and five years.

Depending on where you live and your marital status, some of your property may be exempt from being sold when you file Chapter 7 because of state-specific and federal exemptions. With exemptions, whether they be your home equity, retirement accounts or even personal possessions such as jewelry, you receive the allowed exemption amounts, and the rest of the proceeds will be used to pay off debts. You can read more about potential exemptions, and check out this chart for a quick rundown on the two types:

Chapter 7
  • Child support or alimony
  • Student loans

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