A recent study showed that only about half of respondents could cover their bills each month. For many of these people, their debt only makes this more challenging. If you’re in a similar situation, you might be at your wits’ end trying to find a solution.
In 2021, 3,341 Pennsylvanians filed for Chapter 13 bankruptcy. For these people, Chapter 13 allowed them to have a way to make their monthly debts more affordable and manageable.
Let’s explore how an affordable bankruptcy attorney can help Philadelphia residents have a fresh start through Chapter 13.
What Is Chapter 13 Bankruptcy?
In the United States, there are six different types of bankruptcy. If you are filing as an individual, your case will fall under Chapter 7 or Chapter 13.
After you finish your plan, you are no longer responsible for your bankruptcy case’s debts. Chapter 7 bankruptcy wipes out all of your debts, so it’s also known as liquidation bankruptcy. This type is for people who cannot make any monthly debt payments.
Chapter 13 bankruptcy is also known as a wage earner or repayment plan. The court will approve a repayment plan to pay off your debts over three to five years. After you pay them off, you are no longer responsible for these debts.
The Benefits of Chapter 13 for Pennsylvania Residents
Having all of your debts wiped away through a Chapter 7 case may sound enticing. However, there are some serious negative consequences.
In a Chapter 7 case, a court-appointed trustee liquidates your assets. The cash then is distributed to your creditors. Therefore, if you have a house in foreclosure, you could lose it.
A Chapter 13 case, on the other hand, can still help you take care of your debt, but without the drastic consequences. Notably, it may be possible that you keep the property that you might otherwise lose in a Chapter 7 case, such as your house.
An often overlooked aspect of Chapter 13 bankruptcy is that some of your reorganization plan payments may be tax-deductible, which can help save you money.
If you have co-signers on consumer debts, you may be worried that filing for bankruptcy may negatively affect them. Chapter 13 has special protections that protect third parties who are also liable for these debts.
How Chapter 13 Can Help You Manage Your Debts
Part of your proceedings will determine how long your debt pay-off plan will last. If your monthly income is less than the state median, your plan will last for three years unless the court decides. If your monthly income is greater than the state median, your plan will probably be five years.
A Chapter 13 plan works similarly to a consolidation loan. You will make payments to a trustee who will then distribute the payments to your creditors. This means you don’t have to worry about having direct contact with creditors.
While your plan is in effect, creditors will not start or continue collection efforts. This means you can pay down your debts, save money, and reach your financial goals.
If you have secured debts besides the mortgage on your primary residence, you may be able to reschedule and extend them over the life of your reorganization plan. This can help you lower your payments and better manage your debt.
Chapter 13 uses means testing that is similar to the IRS collections standards. Payments can also be structured around what you can afford to pay each month instead of what you own. Because of this, many petitioners can enjoy significant savings when it comes to their debts.
When you file for Chapter 13 bankruptcy, you’ll have an improved debt to income ratio. This can lead to a higher credit score, giving you better credit terms when you are in your repayment plan and afterward.
How Chapter 13 Can Help You Keep Your Home
The possibility of stopping foreclosure proceedings is one of the main benefits of a Chapter 13 case. Your foreclosure lawyer, which may be from the same law office as your bankruptcy attorney, can help you stop the proceedings correctly.
Over time, you can even cure your delinquent mortgage payments. While you are on a Chapter 13 plan, you must make all of your mortgage payments on time.
Many people believe that you won’t get an approved mortgage if you work through a Chapter 13 plan. Although it might be easy, you could even qualify for a mortgage during your bankruptcy with some planning and strategy.
Similarly, you can also purchase a car during Chapter 13. This is especially important because you probably need your vehicle to live and work, yet they wear out over time.
Because of these factors, Chapter 13 can help make your living situation more affordable. You don’t need to worry about losing your home and being stuck in a difficult situation.
Why You Need a Bankruptcy Lawyer
Bankruptcy is a tough choice that has significant long-term consequences. It can be a confusing and lengthy process that many people find challenging to navigate. A bankruptcy attorney can help you and make the process more successful.
A bankruptcy lawyer can give you legal advice that can help you decide whether to file for bankruptcy and which type to file. They can also help direct you in making decisions that can affect what kinds of debts will be affected and what type of property you will keep.
A good bankruptcy lawyer will help you prepare legal documents and represent you in court. Since your lawyer will have more experience and knowledge, you’re much more likely to have a good outcome with the lawyer. A recent study found that lawyer-less filers are ten times more likely to have some debt discharge requests denied or dismissed.
Chapter 13 cases are also much more complex than Chapter 7 cases. This means there are many more places where creditors can make objections to your case and more steps and paperwork.
There are a few signs that hiring a bankruptcy attorney is the way to go. If you find it intimidating to represent yourself in court, a lawyer can deal with you.
Similarly, paperwork can be overwhelming since it needs to be filled out correctly and on time. Your lawyer can complete and track your paperwork and collect the documents you need to submit.
Having debt collectors contact, you constantly can get tiring. If you tell a debt collector that you have a lawyer who represents you, the collector must communicate with the lawyer instead of you.
How to Choose an Affordable Bankruptcy Attorney
If you are considering bankruptcy, your finances are probably concerning to you. However, there are affordable bankruptcy attorneys.
When looking for an affordable bankruptcy lawyer, it’s essential to choose one that thoroughly knows the law. Because of this, start by looking for one in your local area. Having a Philadelphia-based attorney will give you a better outcome.
Any lawyer you consider must hold a law degree and be licensed in their state. If you live in Philadelphia, your attorney must be licensed in Pennsylvania. It is also critical that you hire a qualified and reputable lawyer.
You should also discuss their experience with bankruptcy cases. Having significant experience can make your case smoother and lead to a more successful outcome.
It’s also important to inquire about what fees your potential lawyer charges. Doing so can ensure you make the best financial choices possible.
How to Decide if Chapter 13 Is Right for You
If you hire a lawyer, one of the main benefits is that they can help you decide whether bankruptcy is the best choice for you. In addition, they can help you consider your financial position and the consequences of each type of bankruptcy to determine if Chapter 13 is preferable to Chapter 7 bankruptcy.
There are also some exemptions regarding Chapter 13 bankruptcy and owning a home that can affect whether you qualify for bankruptcy. Your mortgage and property value must be over a certain amount to qualify. Your bankruptcy and foreclosure attorney will help via appraisals to see if Chapter 13 is the best option.
Make Your Debts Affordable with Chapter 13 in Pennsylvania
Chapter 13 bankruptcy can help give Philadelphia residents a clean start regarding their debt and managing their money. If you need help making your debts more affordable, discussing your situation with a reasonably affordable bankruptcy attorney can help you decide if this is the right path.
Call Sadek and Cooper Law Offices, LLC. to schedule your free initial consultation today.