By Dennis Plank, Attorney
For Lancaster County residents who are struggling with debt, filing for bankruptcy may be a wise choice that can put them back on solid financial footing. Here are five things to do before making that decision:
1. Identify Debts and Determine if Bankruptcy Will Help
Bankruptcy can be a wise option for debt relief, but it’s not for everyone. For those who are struggling with unsecured debt, such as credit card debt, medical bills, personal loans, and unpaid utility bills, filing for bankruptcy can offer total debt forgiveness. Bankruptcy can also help those who have fallen behind on secured debt, like mortgage payments and car loans. However, there are certain debts that bankruptcy typically will not eliminate, except in rare cases, including child support and alimony obligations, student loans, and tax debt. If the bulk of debt falls under one of those categories, then filing for bankruptcy probably doesn’t make sense.
2. Make Sure Pennsylvania’s Residency Requirements are Met
Although bankruptcy is governed by federal law, each state has its own set of rules and exemptions regarding what property is legally protected and how bankruptcy laws are interpreted. Although a debtor might find it more beneficial to file bankruptcy in one state rather than another, they must meet certain residency requirements.
If a Pennsylvania resident has lived in the state for fewer than two years, then they must file bankruptcy in the state where they have lived at least 91 out of the 180 days preceding the filing date. Lancaster County residents are in the jurisdiction of the United States Bankruptcy Court for the Eastern District of Pennsylvania.
3. Understand Credit Counseling Requirements
Before filing for bankruptcy in Pennsylvania, debtors must prove that they have completed credit counseling within the previous 180 days.
Credit counseling is a federal requirement designed to review the type of debt and other debt management options for relief to determine if filing for bankruptcy is the right choice. Additional debtor education is required later in the bankruptcy process. Failure to meet counseling requirements can result in the dismissal of a bankruptcy case.
4. Learn Bankruptcy Filing Requirements and Benefits
In addition to the certificate verifying credit counseling, filing for bankruptcy requires numerous other documents outlining financial information, debts, and assets. Gathering that information will also help determine whether Chapter 7 or Chapter 13 bankruptcy is the best option and, in the case of couples, whether they should file a joint bankruptcy or individual bankruptcies.
Chapter 7 makes more sense for Pennsylvania residents with lower incomes and substantial unsecured debt, such as credit card debt. For those with higher incomes who have fallen behind on secured debt, such as a mortgage, Chapter 13 can prioritize debt and design a repayment plan based on income.
Married couples can double their exemptions when filing jointly in Pennsylvania. Joint filing can also result in significant savings in court filing fees and attorney fees. However, in cases where one spouse holds the majority of the debt or separately owns a large number of unprotected assets, it may make more sense to file individually.
5. Hire an Experienced Bankruptcy Attorney
An experienced bankruptcy lawyer can help clients determine if bankruptcy is the right choice or if alternative forms of debt relief make more sense. If bankruptcy is the best option, an attorney can activate an automatic stay that will stop collections and prohibit creditors from pursuing any collection activity, including telephone calls, attachments, and the filing of lawsuits.
A bankruptcy lawyer can also handle the complicated filing process, protect important assets, create structured payment plans to pay off any remaining debt, and map out an improved financial future. For more information about filing for bankruptcy, contact Going and Plank in downtown Lancaster.
The Law Offices of Going and Plank are a debt relief agency. We help people file for bankruptcy under the bankruptcy code.
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