Every month hundreds of individuals file for Chapter 13 Bankruptcy in Pennsylvania. Individuals owing less than $394,725 total in unsecured debts and $1,184,200 in secure debts are able to file Chapter 13 bankruptcy and retain ownership of some secured assets like a home or vehicle.
Chapter 13 is a type of bankruptcy allowing individual to propose a repayment plan to catch up on past due debt over a three to five while also discharging some portions of unsecured debt. Rather than liquidating assets like in Chapter 7, Chapter 13 bankruptcy pays off past due debt using an individual’s income, leading some to refer to it as a wage earner’s plan.
What is Chapter 13 Bankruptcy in Pennsylvania?
Chapter 13 Bankruptcy is typically chosen by those who want to keep secured assets. These assets include items such as your home or vehicle. This is especially common among those facing bankruptcy who have more equity in a secured asset. Chapter 13 Bankruptcy can sometimes halt the foreclosure or repossession process of such assets.
Under Pennsylvania law and federal law, Chapter 13 Bankruptcy is a reorganization of debt. In layman’s terms, it’s a way for someone facing financial distress to reduce the amount they owe, as well as an opportunity to negotiate the time frame in which they must pay back what they owe creditor.
While it’s possible to file for bankruptcy in Pennsylvania without the assistance of an attorney, most people choose to work with one. From selecting the type of bankruptcy, and navigating the exemptions, attorneys guide you through the process in a way that can help you benefit from the law as much as your situation will allow. Bankruptcy attorneys also help you fully understand the long-term consequences of filing.
The process starts with the initial bankruptcy filing. This includes a repayment plan showing the past due debt, and current financial obligations. Typically, the individual pays an amount each month towards to repayment plan. This process consists of their regular debt payments plus additional payments, to catch up on past due amounts.
Filing Chapter 13 Bankruptcy in Pennsylvania
Depending on how long it takes to prepare your filing and how long the terms you set out in your repayment plan are, Chapter 13 can take anywhere from three to nearly six years in Pennsylvania. Creditor negotiations can also extend or shorten the process.
Consultation
The first step an individual normally takes is consulting a bankruptcy attorney. This person acts as a guide through the process and offers advice on the different options available and helps with the filing process.
The filing requires a comprehensive itemization of both the person’s debt as well as income. Monthly living expenses, debts, and possessions are all types of income sources, which must be documented and itemized. The amount of these income sources are part of the calculation to determine how much you owe, and the amount of your monthly payments. This paperwork refers to the individual filing as the debtor.
Before the filing can be turned in, the debtor attends the federally required credit counseling course. This is usually completed during the paperwork process. The itemization allows for the debtor, usually with help from a Pennsylvania bankruptcy attorney, determine which belongings and property are exempt from seizure.
Developing a Payment Plan
The next step in the process is creating the payment plan. To create the plan you take your income minus your monthly living expenses. The remaining amount is what you will pay towards your outstanding debt. The Pennsylvania Means Test, determines how much of a debtor’s income will be used for living expenses, and monthly bankruptcy plan payments.
In a repayment plan not at debt is equal. Secured debt must be paid in full, including past due amounts. Money due to the government, or money ordered to be paid by a government, such as back child support, must also be paid in full. For the most part creditors seeking payments on unsecured debt, will generally settled for much less than is owed.
Once the list of creditors and repayment plan is complete, the official filing can take place. The Eastern District of Pennsylvania Bankruptcy court has locations in Philadelphia and Reading. The filing fee is $310.
Pennsylvania Chapter 13 Bankruptcy Forms
The Eastern District of Pennsylvania handles a large volume of the Chapter 13 bankruptcies in Pennsylvania. The state also has a Middle and Western district. The documents due at the initial filing, as well as those due within the 14 days following the filing are available on the court’s website in the form of a pdf.
The cost of filing for Chapter 13 Bankruptcy in Pennsylvania is $310. You can pay with cash, check, or money order.
The Eastern District of Pennsylvania Court offers resources to debtors who do not have an attorney. However, Pennsylvania judges, judges’ staff, clerk, or clerk’s staff are not able to give legal advice. Therefore, your attorney is your best source of information about the complex legal process of bankruptcy.
Pennsylvania Chapter 13 Bankruptcy Exemptions:
What is owed and what someone gets to keep in bankruptcy are determined by “bankruptcy exemptions.” One of the key differences between Chapter 7 Bankruptcy and Chapter 13 bankruptcy in Pennsylvania, is that Chapter 7 requires you to liquidate more assets in order to pay off debt. Conversely, Chapter 13 allows a repayment plan, rather than assets, to pay off debts owed.
Pennsylvania allows a debtor the choice of using the state’s set of bankruptcy exemption or the set offered under federal law. An individual cannot mix the two, however, and must use the whole set of one or the other. This decision is usually made with the help of an attorney based on which set best suits the needs of the individual’s unique situation.
Unlike some states, Pennsylvania allows married couples to double the exemption amount they own together.
Pennsylvania does not have a homestead exemption. Most pensions and retirement funds are exempt, including a portion of some insurance and annuity payments.
The Rules for Chapter 13 Bankruptcy in Pennsylvania:
The Eastern District of Pennsylvania Court Bankruptcy Court lists the rules and requirements for filing a case for Chapter 13 Bankruptcy in Pennsylvania on the court’s website.
Cases will not be eligible for discharge without the debtor completing the required courses. Pennsylvania requires debtors filing for Chapter 13 to complete credit counseling and financial management courses as part of the process. Within the 180 days before filing, the debtor must complete a credit counseling course. When you begin the initial filing you must include the certificate of completion. Once the filing is complete, a financial management course must also be completed before the last repayment plan payment. Married individuals who are filing jointly must both complete the required courses.
The debtor is required in the initial filing to provide the initial required documents and the filing fee. The debtor then has 14 days to provide all other required forms. If certain documents are not received by the court within 45 days, the court may dismiss the cases automatically on the 46th day.
Unsecured Debt Cases for Chapter 13 Bankruptcy in Pennsylvania
Chapter 13 Bankruptcy cases divide debt into three main categories.
- Secured debt
- Priority unsecured debt
- General unsecured debt
Secured debts, like mortgages and car loans are backed by ownership of an item at market value.
Unsecured debt, conversely, is debt without backing from tangible collateral. Debt such as past due taxes, child support, and student loans are types of unsecured debt. These types of debt are different than general unsecured debt.
Sometimes creditors often agree to discharge a debt that is substantially lower than the total amount owed. However, you must pay your priority unsecured debt in full during your repayment plan.
Your bankruptcy case will be complete, once the final payment is sent in.
Reverse Mortgages in Chapter 13 Bankruptcy in Pennsylvania
People over the age of 62 who own a home outright, or have a small amount left to payoff, often times select a reverse mortgage. In this type of loan, a bank makes monthly payments based on equity in the home. In return for ownership of the property once it is no longer the individual’s primary residence.
Reverse mortgages can play a serious role in the Chapter 13 Bankruptcy process. This is because not only is a home an asset, but reverse mortgage payments can be a type of income. This type of income can affect certain calculations during the creation of a payment plan. As a result, this may make repayment plans higher with a reverse mortgage. Further, because of the clauses binding a reverse mortgage, a reverse mortgage loan alone may or may not be enough to qualify for the income required by a Chapter 13 type of bankruptcy.
In addition, some reverse mortgages contain clauses that say filing for bankruptcy is a breach of contract. If you file for bankruptcy it will trigger a foreclosure. Pennsylvania residents with reverse mortgages should consult an attorney before filing for Chapter 13. This will ensure that their situation is handled properly, in a way that does not jeopardize the case or home.
Choosing a Chapter 13 Bankruptcy Mortgage Company in Pennsylvania
Bankruptcy is a powerful tool that has helped thousands of Pennsylvania residents recover from dire financial situations. After getting on track with a repayment plan, many individuals are able to purchase a home after a Chapter 13 discharge in as little as one year of on time payments into the plan.
Peoples Bank Mortgage specializes in making home ownership a reality following bankruptcy. We walk you through each step of the home loan process to make it easy for you to get the loan that’s right for you. Reach out today to learn about all your mortgage options.
Published (April 30th, 2018)
Author: Peoples Bank Mortgage