Filing for bankruptcy does not have to be a sign of failure. Sometimes financial misjudgments and living beyond ones means can quickly snowball into insurmountable debt. However, in other cases, debt is the result of circumstances beyond an person’s control, such as overwhelming medical bills or job loss.
For people living in Lancaster County and considering Chapter 7 bankruptcy are not alone. Between 2005 and 2017, Chapter 7 filings totaled 8.7 million, or 68 percent of all consumer bankruptcy filings in federal court. Chapter 7 bankruptcy is not for everyone, but depending on your situation and the type of debt involved, it could be a wise decision that offers a fresh financial start. A Lancaster County Bankruptcy attorney can help determine if Chapter 7 bankruptcy is the right choice on a case by case basis.
A Lancaster County Bankruptcy Attorney Explains Chapter 7
Chapter 7 is the most common form of bankruptcy. For people who have a lot of unsecured debt it may be a smart choice. Unsecured debt is debt that is not tied to an asset, such as your home or car. Some examples of unsecured debts are credit card bills, medical bills, and personal loans. The major benefit of Chapter 7 bankruptcy is that it wipes out unsecured debt and gives the filer fresh start with more manageable expenses.
Who Qualifies for Chapter 7 Bankruptcy?
Not everyone can file for Chapter 7 bankruptcy. To qualify, a person must first meet these requirements:
Pass a means test: Individuals will not qualify for Chapter 7 if they earn too much. They will have to take a means test to compare their monthly income to the average in Pennsylvania. This test will also determine if they have enough disposable income to pay back some of their debt. In that case, you may be a better candidate for Chapter 13 bankruptcy.
Establish residency: To file for Chapter 7 bankruptcy in Pennsylvania, applicants must be a resident of the state for at least 91 out of the last 180 days before the filing date. A Lancaster County bankruptcy attorney can help with this process.
Credit counseling: Applicants also must prove that they have completed credit counseling within the last 180 days. Credit counseling is required by federal law. It is important because it helps people look at the type of debt they have as well as other options for debt relief. It can help applicants decide if Chapter 7 bankruptcy is really the right choice for them. If they decide to file for bankruptcy, there will be more counseling requirements later in the process.
Is Chapter 7 Bankruptcy an Option for You?
Even if an applicant qualifies to file for Chapter 7 bankruptcy, it’s important for them to understand the pros and cons. Here are some things to consider:
Type of debt: If the majority of debt comes from loans tied to an asset, such as auto loans or mortgage payments, then Chapter 7 may not be the right choice unless the applicant is willing to give up that property. Filing for bankruptcy won’t exempt filers from alimony, child support, student loans, or tax debt, either. If the bulk of the debt comes from those sources, Chapter 7 doesn’t make sense. A Lancaster County bankruptcy attorney can help evaluate types of debt and make recommendations on filings.
Assets: For people with a lot of personal assets that they not willing to part with – anything from hobby equipment to artwork – Chapter 7 may not be a good option. While Pennsylvania has exemptions to protect essential items, such as a vehicle, the trustee of the bankruptcy estate will sell off non-exempt items to pay off creditors.
Credit history: Filing Chapter 7 bankruptcy may provide a fresh financial start, but it won’t do the same for one’s credit score, at least not in the short term. Depending on the applicant’s score prior to filing for bankruptcy, it could drop by 100 points or more. Chapter 7 bankruptcy remains on a credit history for 10 years, making it more difficult to get lower interest rates on future loans.
Lawsuits and collection calls: Chapter 7 bankruptcy may be the best way to find immediate relief for those who are already facing collection calls, lawsuits, and wage garnishments, especially if there is no promise of financial improvement in the near future,
Once bankruptcy is filed, a Lancaster County bankruptcy lawyer can activate an automatic stay that stops collections and prohibits creditors from pursuing any collection activity, including telephone calls, attachments, and the filing of lawsuits.
Consult With an Experienced Lancaster County Bankruptcy Attorney?
Lancaster County residents who are are considering Chapter 7 bankruptcy should consult with a Lancaster attorney experienced in bankruptcy law. Contact the Law Offices of Going and Plank in downtown Lancaster if you or someone you know needs help evaluating their financial situation. Our attorney can help explore all of the options for debt relief.
If Chapter 7 bankruptcy is the right choice, we can guide our clients through the Chapter 7 documentation process, ensuring they meet filing deadlines, activating an automatic stay, and helping them plan for a better financial future.