Erie Bankruptcy Lawyers

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

Most people tend to prioritize financial problems because, if unattended, 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. Our attorneys have been successfully handling Pennsylvania Chapter 7 bankruptcy petitions for over 20 years.

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.

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.

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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.

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.”

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
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Chapter 7 Bankruptcy 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.

Choosing whether to file for a Chapter 7 bankruptcy

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.

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 assetssuch 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.

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Bankruptcies and Medical Debt

Approximately 1.61 people out of every 1,000 Pennsylvania residents, on average, file bankruptcy each year. In 2019 in the Eastern District of Pennsylvania, three were 3981 Chapter 7 bankruptcies and 4,232 Chapter 13 bankruptcies. In the Western District of Pennsylvania there were 4,580 Chapter 7 bankruptcies and 2,339 Chapter 13 bankruptcies.

Medical Debt

The cost of medical care in the United States is astronomical, with total healthcare costs eclipsing $3 trillion. Each year, the average person spends nearly $10,000 on healthcare.

MEDICAL DEBT

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Causes of Bankruptcy

Seventy-eight 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)

Living with debt can be extremely stressful andcan 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.

Pennsylvania Bankruptcy Exemptions

The Pennsylvania bankruptcy exemptions are less favorable in protecting personal property.

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. Following are some important facts about 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 priorto 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 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 vs non-dischargeable debts

Not all debts are dischargeable through bankruptcy, and it is crucial for prospective filers to understand exactly what debts are and are not eligible for discharge through bankruptcy. The good news is that most debt is dischargeable through a Pennsylvania Chapter 7 bankruptcy.

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Generally, the following types of debt can be discharged: Medical debt, credit card debt, past due rent, personal loans, car loans & utility bills

Are student loan debts dischargeable?

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.

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.

To prove an undue hardship, a borrow would need to show:

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    Standard of Living

    The borrow would be unable to maintain their current standard of living if they were required to continue making student loan payments

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    Financial Situation

    The borrower’s financial situation is unlikely to change during the student loan repayment period

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    Good Faith

    The borrower made a good-faith effort to make payments on the loan to the best of their financial ability

Non-dischargeable debts

Some types of debts are not eligible for discharge, including:

  • Past due child support, alimony, spousal support and other debts related to familial support;
  • Debtrelated 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
  • ebts that were not listed in the bankruptcy petition.

Potentially dischargeable debts

Othertypes 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 judgeoverseeing 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.

Contact a Pennsylvania Bankruptcy Attorney for Immediate Assistance

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 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.