Philadelphia Bankruptcy Lawyer

Bankruptcy, or some sort of debt relief, has been around since ancient times.  In old Israel, all debts were forgiven every seven years in what was known as the Year of Jubilee.  In Western Europe, individuals who could not repay their creditors were locked up in debtors’ prisons.  Ancient Romans took out loans where they put their bodies down as collateral, and defaulting on those loans meant that they entered debt bondage.  At some point, it was the general consensus that it makes more financial sense to allow debtors to work and repay their debts than to lock them up, or worse.

Relief in Bankruptcy was thought to be so important, that our founding fathers enshrined that right under Article 1, Section 8 of the Constitution, which authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States.”  Modern Bankruptcy Law in the United States aims to strike a balance between relief from creditors in exchange for an honest disclosure of the debtor’s assets and income.  By disclosing assets and income, the debtor hands over control of their financial affairs to the federal government, which in turn stays debt collectors and grants some leniency on repayment.

Bankruptcy Lawyer in Philadelphia

Any competent bankruptcy attorney will tell you that bankruptcy should be your last option, not your first.  A Chapter 7 filing remains on your credit report for ten years, and a Chapter 13 stays on your report for seven years.  If you are able to manage your debts and make more than the minimum payment on your obligations, then you should continue to do so.  However, if an individual falls back on their debts to the point where they default, and their income is not sufficient to cover their debts, those are red flags indicating that it may be time to talk to an attorney about bankruptcy.  You may be able to improve your credit faster by filing for bankruptcy and managing your debts better after discharge than by attempting to dig yourself out of your debt hole with no shovel.

Foreclosure is also a big red flag indicating that it may be time to speak to a bankruptcy attorney.  If you have fallen behind on your mortgage and your bank is no longer accepting your payments, it is only a matter of time before they look to foreclose on your property.  Assuming that the debtor has an adequate source of income, filing for Chapter 13 helps in two ways.

First, like all bankruptcy filings, it automatically stays any actions against the debtor, including a foreclosure action or Sheriff’s sale.  A bankruptcy should be filed a day prior to the Sheriff’s sale date at the latest, with facsimile notice to the Sheriff’s office and court the day prior in order to avoid a sale.

Second, Chapter 13 allows a debtor to resume regular monthly payments to the bank, and to make up the amount for which you have fallen behind, also known as the arrears.  Unfortunately, it is not possible to simply get rid of the mortgage, or to get rid of the arrears, except in some cases where a second mortgage is oversecured.  That means that there are two mortgages on your home, and one mortgage has a higher balance than what your house is worth.

Lawyer In Philadelphia For Bankruptcy

Deciding whether to file under Chapter 7 or whether to file under Chapter 13 requires a detailed review of your specific financial situation, and it should be done with the assistance of counsel.  It is also important to remember that some debts are not dischargeable.  Student loans cannot be discharged, except in extreme circumstances.  Domestic support obligations can never be discharged, and failure to pay those obligations can mean contempt of court and prison time.  Tax arrears that are more recent than three years, as well as any criminal penalty or restitution order, are also nondischargeable debts.

This content was written on behalf of Greg Prosmushkin.