Chapter 7 Bankruptcy

Erie Chapter 7 Bankruptcy Lawyers Help Clients Put Their Past Financial Troubles Behind Them

Most people tend to prioritize financial problems because, if unattended to, they tend to creep into all other aspects of life. At the same time, these financial difficulties can be extremely difficult to overcome, especially in the face of recent job loss, income reduction or disability. If left unresolved, outstanding bills will inevitably result in annoying letters, harassing phone calls and, potentially, court judgments.

Chapter 7 bankruptcy offers many Pennsylvanians an alternative to the constant fight to stay ahead of their financial woes. At the Erie bankruptcy law firm of Melaragno, Placidi & Parini, we help clients overcome their financial problems and set themselves on a path towards a new financial future. Our attorneys have been successfully handling Pennsylvania Chapter 7 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 to 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 7 bankruptcies filed compared to total bankruptcies changes each year, it generally hovers around 70 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)

Source: https://www.fool.com/the-ascent/research/personal-bankruptcy-statistics/

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 in Pennsylvania who are 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 your individual circumstances. Individuals that 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 you as well.

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 then 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. The Bankruptcy Code has “exemptions.” Exemptions allow individuals to protect and keep assets that have equity up to statutory dollar amounts. 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”.

Chapter 13 Bankruptcy:
Chapter 13 bankruptcies are also called “reorganization bankruptcies.” A Chapter 13 bankruptcy is different from a Chapter 7 bankruptcy 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 either three or five years. Those who have significant assets that they wish to keep – such as a home – often choose Chapter 13 bankruptcy because it allows them to keep their assets while getting ahold of their finances.

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 claims. We understand that the decision whether 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.

Bankruptcy Exemptions: Property You Can Keep During a Chapter 7 Bankruptcy

When someone files for a Pennsylvania Chapter 7 bankruptcy, the court will appoint a trustee to gather and sell the filer’s non-exempt assets. The money received from the sale will be used to pay the filer’s creditors. However, filing for a Chapter 7 bankruptcy does not mean that someone needs to give up all their property.

As noted above, only non-exempt assets will be sold during a Chapter 7 bankruptcy. They key to knowing what property can be kept during a Chapter 7 bankruptcy is in understanding the state and federal bankruptcy exemptions. Pennsylvania is one of the few states that has its own set of exemptions, and also allows filers to use the federal exemptions. However, filers must choose to use either the Pennsylvania exemptions or the federal exemptions. When thinking about exemptions, it is important to remember that, if a couple files for Chapter 7 bankruptcy together, the exemption amounts will be doubled.

Federal Exemptions:

The list of federal exemptions is quite lengthy, and some of the more obscure exemptions will not apply to many filers. However, the more common federal exemptions are:

  • Homestead: $25,150 in real property
  • Vehicle: $4,000
  • Jewelry: $1,700
  • Household goods: $625 per asset, with a maximum of $13,400
  • Tools of the trade: $2,525
  • Accrued dividends or interest in a life insurance policy: $13,400
  • Wildcard: $1,325 (can be used to protect any type of personal property)

Importantly, any unused portion of the homestead exception, up to $12,575, can be used to protect any other personal property, such as jewelry, cars, RVs or investments. In addition, the federal bankruptcy exemptions also protect assets such as IRAs, pension plans, retirement accounts and cash-value life insurance. Certain sources of income may also be protected, such as public assistance, Veteran’s benefits, alimony and child support.

Pennsylvania Exemptions

The Pennsylvania bankruptcy exemptions are less favorable when it comes to the protection of personal property. For example, Pennsylvania does not offer any specific exemptions for homeowners. Thus, a filer’s home may be liquidated when the file Chapter 7 bankruptcy. However, Pennsylvania does provide protection for spouses that own a home together. Homes that are owned by both spouses as “tenants in the entirety” cannot be sold to pay down one spouse’s debt. Tenancy in the entirety is a type of property ownership in which both spouses are said to own 100 percent of the home. Below are some additional important points regarding the Pennsylvania bankruptcy exemptions:

  • The Pennsylvania wildcard exemption is $300.
  • There is no Pennsylvania exemption for motor vehicles.
  • Public benefits, such as workers’ compensation benefits, veteran’s benefits, and unemployment benefits are all exempt from liquidation.
  • A retirement fund is exempt, up to a deposit of $15,000 a year. However, the exemption cuts off 12 months prior to the filing of bankruptcy.
  • Pensions for city and state government employees are exempt from liquidation.
  • Up to $100 per month of insurance payments or annuity payments are exempt from liquidation.

The choice of whether to use the Pennsylvania exemptions or federal exemptions is a strategic decision that should be made with the assistance of an experienced Pennsylvania bankruptcy attorney. By working with an attorney, you can ensure that you are protecting as much of your property as the law allows.

Dischargeable Versus Non-Dischargeable Debts

The very reason for filing for bankruptcy is to discharge burdensome debt. However, not all debts are dischargeable through bankruptcy, and it is crucial for prospective filers to understand exactly what debts are eligible for discharge through bankruptcy – as well as what cannot be discharged.

The good news is that most debt is dischargeable through a Pennsylvania Chapter 7 bankruptcy. Generally, the following types of debt can be discharged:

  • Medical debt
  • Credit card debt
  • Past due rent
  • Personal loans
  • Car loans
  • Utility bills

On the other hand, some types of debts are not eligible for discharge. These include:

  • Past due child support, alimony, spousal support and other debts related to familial support;
  • Debt related to a personal injury or wrongful death claim resulting from a drunk driving accident;
  • Fines and penalties for violating the law, such as tickets and outstanding court fees;
  • Income tax debt from the three years prior to filing for bankruptcy; and
  • Debts that were not listed in the bankruptcy petition.

Other types of debt can be non-dischargeable, not because of the type of debt, but because a judge determines them to be so. For example, the following debts may be determined to be non-dischargeable by the judge overseeing the bankruptcy:

  • Credit card purchases for luxury items in excess of $1,150 that were made within 60 days of filing;
  • Debt related to intentional, willful, or malicious injuries to another person;
  • Debts incurred on the basis of fraud; and
  • Debts owed under a divorce decree.

One of the more common questions is whether student loan debt is dischargeable. Generally, the answer is that student loan debt is not dischargeable. However, if a borrower is able to show that repaying the loan would post an undue hardship, the debt may be discharged through a bankruptcy. To prove an undue hardship, a borrow would need to show:

1. The borrow would be unable to maintain their current standard of living if they were required to continue making student loan payments;
2. The borrower’s financial situation is unlikely to change during the student loan repayment period; and
3. The borrower made a good-faith effort to make payments on the loan to the best of their financial ability.

Those who are considering bankruptcy should reach out to a Western Pennsylvania bankruptcy lawyer for help in understanding the process, as well as whether the debts that are holding them back are likely to be discharged through a Chapter 7 bankruptcy.

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 7 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 7 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.