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When You Should File for Chapter 7 and Chapter 13 Bankruptcy



By:Mike Cibik

When Should You File For Bankruptcy?


In the last five years over a million Americans have filed for bankruptcy. Contrary to the popular belief that your credit scores will go nowhere but down if you file for bankruptcy, it’s quite the opposite. When you’re close to the bottom of a financial breakdown, your credit has already taken a beating. Once you file for bankruptcy and stick to the path that has been charted out, your credit score will only rise.


Filing for bankruptcy is never an easy thing to do. Most of us feel that it is our duty to pay back what we owe. Although that’s a good thought at the time for it has come and gone, even more so if you are reeling under the pressure of constricted finances and bills that are piling up.


Even if you feel that you can work towards paying the minimum amount due, you should know that it will hardly make a dent in the overall amount due. And the more you delay in filing your bankruptcy, the more you will be hurting your credit scores. You deserve a new lease of life and leave behind the past.


Chapter 7 Bankruptcy


In Philadelphia, a Chapter 7 bankruptcy filing can help you get rid of your consumer debts and any medical bills that you haven’t settled. Bankruptcy can’t get rid of debts like child support, student loans, and taxes that you owe. Your non-exempt property will be liquidated to pay creditors. This is also known as “fresh-start” bankruptcy.


In order to qualify for filing a Chapter 7 bankruptcy claim, you will have to pass the complicated Means Test. It’s a measure to find out whether granting Chapter 7 will be an “abuse” of the law, keeping your income and expenses in mind. If you don’t qualify for Chapter 7, you may be eligible for other chapters of the Bankruptcy Code.


Filing a bankruptcy claim can be cumbersome and complicated. There is also a comprehensive list of documents that are required at the time of filing and another set that is needed within 14 days. There’s a chance of your case being dismissed in case any of the documents are missing.


A bankruptcy attorney will be able to help you if you are having trouble making sense of it all. They will also help you understand your rights and file the right paperwork.


Chapter 13 Bankruptcy


A Chapter 13 filing is different from Chapter 7. This is generally filed when there’s a looming threat of mortgage foreclosure or when you want to lower your monthly outgo of payments. It would mean reorganizing your debt and providing a structure for your payments. You will have to disclose your income and also the things that you wouldn’t want to liquidate.


If you stick to the payment plan, your remaining dischargeable debts will be released by the end of the term (typically 3 to 5 years). Chapter 13 is generally used when you have more secured assets like a house or a car than the maximum limit allowed under bankruptcy exemptions.


An “instructional course in personal financial management” is mandatory for individuals who have filed chapters 7 or 13. It must be completed before your debts are discharged.  There are certain exceptions to this. Especially when there aren’t qualified counseling agencies to counsel individuals who are filing for bankruptcy.


Automatic Stay


Once the court approves your filing, an automatic stay comes into effect. It’s a protective order that ensures that no creditor contacts or harasses you about your debts or threatens you with foreclosure. It shields you from additional pressures while you try to consolidate your payments in case of Chapter 13 or seek relief from your debts under Chapter 7. Filing bankruptcy can help you get rid of your unsecured debts, loans, and even credit card debts.


Contact a Bankruptcy Lawyer


If you are going through the process of filing for bankruptcy while under financial stress, understandably you’re going through a lot. A bankruptcy attorney can help alleviate some of this stress by navigate you through the complex process of filing and ensuring that you get a fresh start.


The Philadelphia bankruptcy lawyers at Cibik & Cataldo P.C., have over 35 years of experience of providing superior, cost-efficient, and value-oriented legal services to all clients. Contact our dedicated legal team at (215)-735-1060 for a free consultation.


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