Because individual circumstances vary, we encourage persons interested in bankruptcy to visit our offices for a personal consultation. There is no charge for the initial consultation in a bankruptcy case.
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by the United States Constitution, and governed by federal law.
Bankruptcy may make it possible for you to receive a discharge from your debts, and stop foreclosure on your house or mobile home, allowing you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
Bankruptcy cannot cure every financial problem. Nor is it the right step for every individual. Bankruptcy does not:
• Eliminate certain rights of "secured" creditors, who may have a mortgage or be holding a vehicle title. Typically, you can keep the property after bankruptcy, so long as the secured creditor is paid.
• Discharge certain types of debt, such as child support, alimony, student loans, criminal fines, and (in some cases) taxes. Cosigners are not discharged (unless they also file bankruptcy).
There are a number of alternatives to filing a bankruptcy petition. There are a variety of companies which will assist you in negotiating payment plans with your creditors. Some of these are legitimate, however other companies may charge large fees, and deliver little in return. Before entering into any such plan, you should consider it carefully, and determine whether the payments are ones that you can afford, and whether all of the creditors will accept the plan. In contrast to the protections offered in Bankruptcy, your creditors are not required to participate in these plans.
If you want to try this, it is recommended that a reputable, non-profit agency be consulted, such as Advantage Credit Counseling, 917A Logan Blvd., Altoona, Pa. 16601. 866-409-2227.
There are four types of bankruptcy cases provided under the law:
Chapter 7 The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for "exempt" property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors.
Most Pennsylvania residents use the federal exemptions. These allow you to keep a fair amount of property, depending on its value. The exemptions include (as of April 10, 2010) up to $21,625.00 in equity in a residential home (twice that amount if the home is owned jointly by a Husband and Wife), and other exemptions for Motor Vehicles, Household Goods, etc.
Some persons are not eligible to file a Chapter 7 case because their income is too high. Anyone whose income is below the median income for the state is eligible, and some persons at higher income levels may also qualify, depending on their individual circumstances. The dollar amounts are adjusted based on census figures: as of November 1, 2011, the median income levels are:
Chapter 11 Chapter 11 is used for business reorganization. Chapter 11 can also be used by large or small businesses. In Chapter 11, a Plan is proposed, which provides for the treatment of types of debt, which is then submitted to the creditors for their approval.
Chapter 12 Chapter 12 of the Bankruptcy Code permits farmers to file a reorganization plan, with terms that are more liberal than either Chapter 11 or Chapter 13.
Chapter 13 In a chapter 13 case you file a "plan" showing how you will pay off some of your past due and current debts over three to five years. Chapter 13 can be used by persons whose income is too large to file a Chapter 7 case, or by those who need to make payments so as to avoid losing secured assets such as a house or car. You are permitted to "cure" the default, by making payments sufficient to make up the amount by which you are behind on your payments (as well as any regular monthly payments), over the life of the plan.
What Will Happen to My Home and Car If I File Bankruptcy?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it in a Chapter 13.
However, some of your creditors may have a "security interest" in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
Can I Own Anything After Bankruptcy?
Yes! You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, or life insurance benefits within 180 days after filing for bankruptcy, that money or property will be included as an asset in your bankruptcy case.
Will I Have to Go to Court?
In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.
Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.
Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will not help your credit, however it is possible to rebuild your credit after a bankruptcy. If you have continued to pay on your secured loans, and made those payments on time, that may help.
The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. Whether or not you get a loan after bankruptcy depends on many factors, including your record of paying any loans which were re-affirmed in the bankruptcy. In some cases, you may be forced to pay a higher interest rate in order to obtain a loan after bankruptcy.
What Else Should I Know?
Utility services--Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.
Discrimination--An employer or government agency cannot discriminate against you because you have filed for bankruptcy.
Driver's license--If you lost your license solely because you couldn't pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.
Cosigners--If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt
David M. Axinn, Attorney at Law
104A Hollidaysburg Plaza
Duncansville, PA 16635
The Law Offices of David M. Axinn are located in Duncansville, Pa., not far from Hollidaysburg and Altoona. I practice in Blair county, along with the neighboring central pennsylvania counties of Bedford, Cambria, Centre and Huntingdon.
