By Dennis L. Plank, Attorney
Homeownership is often a cornerstone of long-term financial stability, so it can be scary if a mortgage goes into foreclosure. However, even if foreclosure proceedings have already started, there are legal tools Pennsylvanians can use to protect their property. Chapter 13 bankruptcy was designed to help people repay debts, usually without liquidating assets.
This type of bankruptcy enables people to manage debt without losing their homes. Once filed, it suspends any current foreclosure proceedings and puts a temporary hold on the repayment of other financial obligations. But this type of bankruptcy does not eliminate debt. Instead, suspensions are implemented to allow the filer time to develop a comprehensive repayment schedule.
How Does Chapter 13 Work?
This type of bankruptcy is sometimes called the “Wage Earner’s Bankruptcy.” Once the court agrees on a repayment plan, filers usually have three to five years to resolve their debts. Pennsylvania law mandates that filers must remain under the supervision of a court-appointed trustee who collects and distributes debt payments on their behalf. Late installments are not allowed. If a financial situation changes or becomes more severe, the filer must notify their attorney immediately and seek a plan modification.
Who Qualifies?
Not everyone qualifies for Chapter 13 relief. Filers must demonstrate that they have the means to pay down debts over time. For those who are unlikely to have the income for eventual repayment, Chapter 7 bankruptcy may be an option.
To qualify for Chapter 13, filers must disclose their sources of income and submit the information to the court within fourteen days of filing a petition. Income is tallied using various sources, including pension income, Social Security payments, unemployment compensation, royalties, rent, and proceeds from a property sale.
Additionally, applicants must undergo credit counseling from an approved agency within 180 days. Chapter 13 will also negatively affect credit rates for many years and may make it difficult for the filer to borrow during that period.
Even if the filer is self-employed or operating an unincorporated business, they may be eligible to file for Chapter 13 relief if debts are less than $2,750,000. Note that the government adjusts these figures periodically to reflect changes in the consumer price index.
Going and Plank handles Chapter 13 and Chapter 7 bankruptcies designed to help individual filers. However, stockbrokers and commodity brokers are ineligible for Chapter 13 bankruptcy, even if their debts are personal. Businesses must file Chapter 11. Farmers must file for Chapter 12 bankruptcy.
Does Bankruptcy Eliminate Government Debt?
Bankruptcy is a way to repay government debt but will not eliminate tax debt or federal student loans. Responsibilities for child support and alimony payments also remain intact.
Filers must submit proof that they have filed state and federal tax returns for the past four years. If an applicant can’t provide evidence of tax payments, their case can be delayed or even dismissed.
Are You Ready for a Free Consultation?
The Law Offices of Going and Plank offer free initial consultations for bankruptcy clients. If the applicant decides to move forward with Going and Plank’s services, the legal team will help clients gather the paperwork needed to get started, including:
- An inventory of creditors and the amount of debt owed to each.
- Copies of recent federal income tax returns and a statement of any unpaid taxes
- A detailed list of monthly living expenses
- Documentation on income and sources of income
- A list of assets, including home(s), vehicle(s), and their accompanying leases, contracts, payment schedules, or mortgage agreements
Schedule Your Free Consultation
Chapter 13 bankruptcy helps some people get debt under control without losing their homes or assets. To determine if Chapter 13 is right for you, contact The Law Offices of Going and Plank to schedule your free consultation.
Want to learn more about bankruptcy? Check out these articles.
Could Bankruptcy Help Deal With Overwhelming Debt?
Who can Declare Bankruptcy? Take the Quiz.
Learn Why Some Lancaster County Residents are Filing for Bankruptcy
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