What Bankruptcy Type is Right for Me?
In 2023, there were a total of 452,990 bankruptcy filings, an increase of 16.8% from the prior year. If you are considering bankruptcy, you are likely doing so after other debt-relief options have fallen through. Given the complexity of federal law, you may be confused about what type of bankruptcy is right for you.
In this blog, our Harrisburg debt relief lawyers discuss the differences between the different bankruptcy filings for individuals, and the benefits of consulting an attorney during the process.
What is Bankruptcy?
Individuals who choose bankruptcy may be able to reduce or negate their debt. Whereas individuals can choose between Chapter 7 or Chapter 13, a Chapter 11 filing is available to businesses that want to restructure their debt. In this blog, we will focus exclusively on Chapter 7 and Chapter 13 filings. You should consult an experienced bankruptcy attorney if you have these issues.
Not all debts are dischargeable, so bankruptcy may not be the right option for you if you have student loan debt, owe back taxes, child support, spousal support, or have debts owed from a personal injury suit due to driving under the influence.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is available to individuals, partnerships, corporations, and other business entities who want to wipe out their debt. For individuals, Chapter 7 bankruptcy is intended for persons who can exempt all of their assets and do not have excessive income. Chapter 7 is also for individuals who have mostly business debts and very few assets. Chapter 7 usually wipes the slate clean and allows individuals to start over.For individuals in Pennsylvania, Chapter 7 individual cases rarely involve liquidating assets to pay off creditors.
To qualify for Chapter 7, you must be below a certain income limit (known as the “means test”). These limits are based on the median family income and are updated frequently. For an individual filing between May 15 and October 31, 2024, in Pennsylvania, the annual income limit is $66,923, with couples being capped at $81,574.
Businesses can also file Chapter 7. This usually results in the business ending its business with any assets being sold to pay creditors.
Chapter 13 Bankruptcy
Commonly known as a “wage earner’s plan,” Chapter 13 bankruptcy is available to persons who have a regular source of income of some sort and usually are looking to set up payment plans to pay off their debt. To qualify, you must have less than $2.75 million in total secured and unsecured debts. Secured debt is any debt backed up by collateral, such as your house or vehicle, while an unsecured debt does not put an asset at risk (i.e., credit card debt).
Chapter 13 permits an individual to pay off a portion or the entirety of their debt. Most repayment plans allow individuals to have three to five years to repay their debt. Sometimes, Chapter 13 is funded by the sale of extra assets.
Why Should I Use a Debt Relief Lawyer When Filing Bankruptcy?
Filing for bankruptcy requires a thorough understanding of the law. Filing for bankruptcy without counsel is not wise since an attorney can advise you on which of your debts can be discharged, suggest which bankruptcy chapter you should file for, and help you complete the appropriate court forms. Our Harrisburg bankruptcy attorneys also understand the tax consequences of different bankruptcy filings, and we will guide you on which avenue will benefit you financially in the long run.
Considering Bankruptcy? Discuss Your Case with Our Harrisburg Debt Relief Lawyers
Bankruptcy law is complex, and if you attempt to file without an attorney, you may make mistakes along the way that can affect your rights. If you are looking for exceptional representation, look no further than Cunningham, Chernicoff & Warshawsky, P.C. Our Harrisburg debt relief lawyers will take the time to fully understand your situation and advise you accordingly. To schedule your initial consultation, contact us online or by phone today.