What Happens When I File for Bankruptcy in Pennsylvania?

Many people associate bankruptcy with failure or hopelessness. However, many companies throughout Pennsylvania and the country file for bankruptcy and continue to operate – and make money. The same is true for people who file for bankruptcy. In nearly every case, a person will emerge from bankruptcy in a much better position than when they originally filed. The problem is most individuals do not understand what happens when they file for bankruptcy. At Young, Marr, Mallis & Associates, our attorneys and staff are dedicated to clearing up the myths and misconceptions associated with bankruptcy. Below, our experienced Philadelphia bankruptcy attorney reviews what occurs when you file.

When You File for Bankruptcy in Pennsylvania an Automatic Stay Goes Into Effect

Most people will file for Chapter 7 or Chapter 13 bankruptcy. Each chapter will be discussed below. However, no matter what chapter you pick or which one is most beneficial in your situation, a court injunction goes into immediate effect. Commonly called an automatic stay, this injunction creates a legal barrier between you and your creditors.

An automatic stay will prohibit your creditors from acting to collect the debts you owe. The importance of this injunction cannot be understated. When a creditor is notified of your bankruptcy filing, they must stop all phone calls, letters, bills, and automatic deductions from your bank account. It applies to all creditors, including credit card companies, collection agencies, utilities, and secured creditors. More importantly than merely stopping phone calls, a stay will prohibit any legal action against you. This means that collection lawsuits will be put on hold, foreclosures stopped, and sheriff sales halted. Filing for bankruptcy freezes your debt while it is addressed in the bankruptcy.

All Debt is Not Equal in a Pennsylvania Bankruptcy

As stated above, all your creditors will be prohibited from taking action to collect the debt you owe. However, any debt you incur after your filing date is not included in your bankruptcy.

Unsecured Debt

If you have any credit cards, you will not be able to use them once the company is notified of the bankruptcy. However, you will not have to make any payments on any outstanding credit card debt. In many cases, the majority of an individual’s debt is unsecured, including credit card debts, medical bills, and personal loans without collateral. After you file for bankruptcy, you will not be required to pay these creditors directly. Your obligation will be discharged or you could be required to pay it through your Chapter 13 plan.

Secured Debt

Secured debt works differently. If you have a car or mortgage payment, it will continue to come due every month after you file.

If you own a home or car and want to keep them, you will have to keep paying your monthly payment after you file for bankruptcy. If you filed Chapter 13 to stop a foreclosure, you will have to pay your regular monthly mortgage while the arrears will be paid through a monthly trustee payment. The same thing will occur if you were behind on your car payments and wish to keep your vehicle.

Utilities

Many people who file for bankruptcy have had their gas, electric, or water turned off because they were delinquent. After you file, any utility that is shut-off should be reconnected. You will have to pay for any usage after you file. Depending on the utility, any outstanding charges could be discharged or would have to be paid back through Chapter 13 if there was a municipal lien.

Priority Debts

Priority debts will survive Chapter 7 and must be paid through Chapter 13. The most common priority debt people have is taxes. However, some taxes are dischargeable in both Chapter 7 and Chapter 13. Furthermore, it is unlikely that your entire tax debt will be considered a priority debt. Our Lower Merion bankruptcy attorney will thoroughly review your tax obligations with you before you file.

Non-Dischargeable Debt

Certain debts cannot be eliminated by filing for bankruptcy. These will survive both Chapter 7 and Chapter 13 filings. For example, certain taxes, child support, alimony, criminal restitution, and most student loans cannot be eliminated through bankruptcy. However, it is possible to obtain some relief by filing. For example, your student loan payments would be deferred for the duration of a Chapter 13 bankruptcy. It is important to note that the interest would continue to accrue. It is crucial to review all your debt with our knowledgeable Pottstown, PA bankruptcy attorney.

What Happens After Filing for Chapter 7 or Chapter 13 in Pennsylvania?

As mentioned earlier, people in Pennsylvania will usually file for either Chapter 7 or Chapter 13. In either chapter, an automatic stay goes into effect. After that, there are some differences.

Chapter 7 is designed for people with little income and resources. When an individual files Chapter 7, a 341 meeting will be scheduled. The 341 meeting is conducted by a court-appointed trustee who will review your documents and ask you a series of questions. If you have property that cannot be protected, the trustee will take possession of the property and sell it – dispersing the proceeds to your creditors. In most cases, a debtor in Pennsylvania will not lose any of their possessions. Our Philadelphia bankruptcy attorney will review your property and assets before filing. Once the 341 meeting is concluded, your debt should be discharged in a couple of months.

When you file Chapter 13, you will also have a scheduled 341 meeting. Our Bucks County bankruptcy attorneys will also file a bankruptcy plan that lists what creditors you will be paying and your monthly payment amount. The exact figures depend on the circumstances of your case. Our office will carefully review your plan with you before filing. Thirty days after filing Chapter 13, your first bankruptcy payment will be due. After 36 or 60 months, depending on your circumstances, the case will conclude and a discharge order will be entered.

Our Pennsylvania Bankruptcy Attorney Will Help You Understand the Bankruptcy Process

This has been a quick overview of what occurs when you file for bankruptcy. There are many complexities that this short article could not cover. Our Pennsylvania bankruptcy attorneys are available to give you a comprehensive overview of what filing for bankruptcy will entail, given your specific circumstances. At Young, Marr, Mallis & Associates, we want our clients to understand the bankruptcy process. Call (215) 701-6519 to schedule a free and confidential appointment.