Chapter 13 Bankruptcy

Knowledgeable Erie Bankruptcy Lawyers Help Clients Through the Chapter 13 Bankruptcy Process

Bankruptcy is not just for those who are struggling after losing their job or suffering from a debilitating medical condition and can no longer work. Anyone can find themselves having a difficult time staying ahead of the constant inflow of bills and expenses. Indeed, the annoying phone calls and letters from creditors are a constant reminder of debts owed, and, over time, can bring you down.

By filing for a Chapter 13 bankruptcy, many Pennsylvanians can reorganize their debts, pay them back slowly and begin a new financial future. At the Erie bankruptcy law firm of Melaragno, Placidi & Parini, we help clients overcome their financial problems and set themselves on a better path. Our attorneys have been successfully handling Pennsylvania Chapter 13 bankruptcy petitions for over 20 years and know the intricacies of the relevant state and federal laws.

Bankruptcy Statistics

Demographics:

  • Fifty-two percent of those who file for bankruptcy are male
  • Sixty-four percent of those who file for bankruptcy are married
  • Thirty-six percent of those who file for bankruptcy have at least a high school education
  • Over 13 percent of those who file for bankruptcy have at least a college education
  • Sixty percent of those who file for bankruptcy make under $30,000 per year

Eight percent of those who filed for bankruptcy have filed for bankruptcy before

Bankruptcies by age group:

  • 18 – 24 years old: 1.33 percent of all bankruptcies
  • 25 to 34 years old: 15.44 percent of all bankruptcies
  • 35 to 44 years old: 27.54 percent of all bankruptcies
  • 45 to 54 years old: 28.45 percent of all bankruptcies
  • 55 to 64 years old: 18.12 percent of all bankruptcies
  • 65 years and older: 9.12 percent of all bankruptcies

Filings:

Over the past few years, the number of bankruptcies across the United States has slightly declined, but held relatively steady:

  • 2015: 819,760 bankruptcies
  • 2016: 770,846 bankruptcies
  • 2017: 765,863 bankruptcies
  • 2018: 751,186 bankruptcies
  • 2019: 753,160 bankruptcies

While the rate of Chapter 13 bankruptcies filed compared to total bankruptcies changes each year, it generally hovers around 30 percent.

Eastern District of Pennsylvania bankruptcies in 2019:

  • Chapter 7: 3,981 bankruptcies
  • Chapter 13: 4,232 bankruptcies

Western District of Pennsylvania bankruptcies in 2019:

  • Chapter 7: 4,580 bankruptcies
  • Chapter 13: 2,339 bankruptcies

1.61 people out of every 1,000 Pennsylvania residents, on average, file bankruptcy each year.

Causes:

77.8 percent of bankruptcy filers agreed that loss of income played a role in them filing for bankruptcy. This was the single most-cited reason for filing. Other common reasons include:

  • Medical expenses
  • Unaffordable mortgage or foreclosure
  • Job loss due to medical condition
  • Divorce or separation
  • Student loans
  • Change in family size (including births and deaths)

Medical debt:

The cost of medical care in the United States is astronomical. Each year, the average person spends nearly $10,000 on healthcare.

  • The average cost of a 15-minute doctor’s visit for an established patient is $104
  • The average daily cost of a hospital stay is $5,220
  • The average total cost of a hospital stay is $15,734

The total amount spent on healthcare in the United States in 2016 was $3.3 trillion

  • 30 percent of this amount was spent on hospital stays

The Two Types of Individual Bankruptcies in Pennsylvania

Average, individual Pennsylvanians considering filing for bankruptcy have two options: Chapter 7 bankruptcy or Chapter 13 bankruptcy. Each type of bankruptcy offers certain features that may be appealing, depending on the individual’s circumstances. People who operate a business or have unique needs may also be eligible to file a Chapter 11 Bankruptcy. If your situation requires a Chapter 11 bankruptcy, the attorneys at Melaragno, Placidi & Parini can discuss that option with.

Chapter 7 Bankruptcy:

A Chapter 7 bankruptcy, also referred to as a “liquidation bankruptcy,” is the most common type of bankruptcy. When someone files for Chapter 7 bankruptcy, the court will immediately impose a temporary stay, whereby all creditors are prohibited from making any attempts to collect on what they are owed. The court will appoint a bankruptcy trustee who will collect all the filer’s non-exempt assets and liquidate, or sell, them. The trustee will take the proceeds from the sale and use them to pay down the creditors. Do not be alarmed. The Bankruptcy Code has “Exemptions.” Exemptions allow individuals to protect and keep assets that have equity up to statutory dollar amounts. Those amounts typically allow the majority of debtors to protect all of their assets. Also, in the vast majority of cases, none of the Debtor’s assets are sold. In either case, where assets are sold or not, any amount owed to the creditors at the end of the proceeding is eliminated by a “discharge order.” However, for those who have significant assets and are earning an income, Chapter 7 bankruptcy may not be available, and even if it is, it may not be preferred because it may mean the liquidation of their possessions.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcies, or “reorganization bankruptcies” are different from Chapter 7 bankruptcies in that the filer’s assets will not be sold. Instead, the court consolidates the filer’s debts, potentially eliminating some unsecured debt, and creates a repayment plan lasting from three to five years. A Pennsylvania Chapter 13 bankruptcy is ideal for those who have assets that they wish to keep – such as a home – and have the income to support making a monthly payment. A Chapter 13 bankruptcy is also helpful if you are in foreclosure and want to stop the foreclosure and obtain time to catch up on the past-due mortgage payments over time.

Choosing whether to file for a Chapter 7 bankruptcy or Chapter 13 bankruptcy is a crucial decision. Often, an individual’s financial circumstances dictate which type of bankruptcy they can file. For example, to file for a Chapter 7 bankruptcy, a filer must take and pass a “means test.” The test is intended to determine whether the filer has the means to file for Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy. On the other hand, those filing for a Chapter 13 bankruptcy must have their repayment plan approved by the court, which will require the filer have enough income to make the monthly payments.

At Melaragno, Placidi & Parini, we have extensive experience handling both Chapter 7 and Chapter 13 bankruptcy cases. We understand that the decision whether or not to file for bankruptcy is a difficult and personal one, and when you meet with one of our attorneys, we will explain the process and advise you of your options, leaving you to make the ultimate decision without any pressure.

The Chapter 13 Bankruptcy Process in Pennsylvania

As is the case with many aspects of life, the unknowns surrounding the bankruptcy process tend to discourage people from filing for a Chapter 13 bankruptcy when doing so may greatly help their financial situation. At Melaragno, Placidi & Parini, we see part of our role in the process as educating clients to help them make the best decision for their family. With over 20 years of experience handling a wide range of Pennsylvania bankruptcy cases, we are uniquely positioned to provide clients with effective advice, whatever their individual circumstances.

Before formally filing for bankruptcy, someone must take a credit counseling course and complete all the bankruptcy paperwork. Of course, depending on the individual’s circumstances, this can be a tedious process because a filer must list all of their assets and debts and fill out various schedules, varying in complexity and detail. Once the bankruptcy petition is formally filed, the court will impose an automatic stay, precluding creditors from taking any steps to collect on the debts they are owed. The automatic stay is put into place as soon as the bankruptcy petition is filed. This will stop wage garnishment, harassing phone calls and annoying letters. If a creditor violates the automatic stay, they can be liable for actual damages, punitive damages as well as attorney’s fees. At the time of the filing of the bankruptcy, the filer will also submit a proposed Chapter 13 Plan that states how the filer intends to repay the secured and unsecured creditors in their case.

After the filing of the bankruptcy, the next step is for the court to appoint a bankruptcy trustee, who will oversee the process and ensure that any proposed plan complies with the United States bankruptcy laws. Once the court appoints a trustee, the court will send out notice to all creditors, informing them of the pending bankruptcy and giving them the chance to object. By this point, the filer has provided their most recent tax return, and arranges to provide the trustee with other requested documentation.

Once the repayment plan is approved, the filer will begin to make payments. The court will then hold the meeting of the creditors, where they will be given an opportunity to object if they hope to modify the terms of the plan. While the bankruptcy judge will hear creditors’ objections, the court can disregard them in a process known as a “cram down.” A cram down is where the judge forces a creditor to accept an unfavorable restructuring of debt against a creditor’s wishes.

Assuming the plan is either modified or approved, the bankruptcy judge will confirm the plan. Creditors will be directed to file a proof of claim, indicating how much they are owed. The filer may again dispute the amounts listed in a proof of claim. After this, the filer will make payments pursuant to the repayment plan. Before the end of the process, the filer must take a personal finance class. Once the repayment term is up, the court will then grant the filer’s discharge.

What Debts Need to Be Repaid in a Chapter 13 Bankruptcy

Chapter 13 bankruptcies, like Chapter 7 bankruptcies, often result in the discharge of some debt. However, unlike Chapter 7 bankruptcies, in a Chapter 13 bankruptcy, generally only unsecured debt is discharged. All secured debt is typically included in the repayment plan and must be repaid in full.

Secured debt refers to debt that which is secured by collateral. For example, a mortgage is secured by a home, and a car loan is secured by a vehicle. Unsecured debt is debt that is not secured by any type of collateral. Below are a few common examples of unsecured debt:

  • Medical bills
  • Credit card debt
  • Personal loans that are not secured by collateral
  • Older tax debts
  • Contractual debt

Based upon the filer’s ability to pay, an amount is determined that must be repaid to the unsecured creditors. The unsecured creditors will receive a pro rata share of the debt they are owed based upon the total amount paid to all unsecured creditors.

Through the process of lien-stripping, a bankruptcy judge can recharacterize the unsecured portion of a secured loan to unsecured debt. For example, if someone owes $20,000 on a vehicle, but it is only worth $10,000, the court may “strip” the unsecured portion (in this case, $10,000), turning it into unsecured debt. The $10,000 that is secured by the vehicle will then be listed separately in the repayment plan and must be paid in full. However, because the unsecured portion was recharacterized as unsecured debt, it will be grouped together with the remaining unsecured debt. There are unique circumstances that are case specific that will govern whether or not it is possible to lien strip.

Contact a Pennsylvania Bankruptcy Attorney for Immediate Assistance

Living with debt can be extremely stressful and can take its toll on a person as well as their relationships. A Chapter 13 bankruptcy may be a way to discharge most or all of your debt while keeping many of the possessions you hold dear. At the Erie bankruptcy law firm of Melaragno, Placidi & Parini, we proudly represent clients who are struggling to help keep up with their bills. Filing for bankruptcy is a personal decision that must be discussed with family members and, unlike other bankruptcy law firms, we will not pressure you into moving forward. In fact, we prefer if you take the time you need to make sure that filing for a Chapter 13 bankruptcy is right for you. If you decide that it is, we are here to help make the process as efficient as possible. To learn more, and to schedule a free consultation with one of our knowledgeable bankruptcy lawyers, call 814-459-5557 today.

Testimonials

I would recommend them to anyone and have. 

John is a great attorney.  John and his staff promptly return calls and emails when you have questions and concerns not only when the process starts but all the way to completion.  John and his staff have been a godsend throughout. I would recommend them to anyone and have. 

- Virginia

I would recommend them to anyone and have. 

John is a great attorney.  John and his staff promptly return calls and emails when you have questions and concerns not only when the process starts but all the way to completion.  John and his staff have been a godsend throughout. I would recommend them to anyone and have. 

- Virginia

Attorney Parini impressed me as soon as I met him.

I knew right off the bat that this attorney was the person I wanted to represent me. His very intimidating posture, led me to believe he could handle anything that would come his way. The man is a winner.  

- J.C.

Gene was awesome!!!

He handled everything so I didn’t have to worry and could just focus on my recovery and get back to work. He was always available and quick to return my phone calls and emails with the answers I needed. My case was handled quickly and with no added stress to me or my family. I would recommend Matt to anyone in need of assistance after a motor vehicle accident.

- V.L.