Northeast Philadelphia Chapter 7 Bankruptcy Lawyer

Relief under Chapter 7 of the Bankruptcy Code is appropriate for individuals who do not have significant assets, and who have a low income. The Bankruptcy Code provides this option to individuals who are in truly dire straits, and need an immediate relief because they are unable to pay their debts at all.

Chapter 7 Bankruptcy Lawyer Northeast Philadelphia

Most debtors without assets are interested in Chapter 7 because it is relatively fast, and because they are not required to pay anything to the bankruptcy court. Most Chapter 7 bankruptcies conclude in roughly five months, and debtors retain all of their assets if they file with the assistance of a competent lawyer.

Based only on the fact that a debtor does not have to pay anything to her creditors in a Chapter 7, and on its speed, you would think that everyone would want to file for relief under Chapter 7. However, there are two reasons why you, as a debtor, would not file for Chapter 7: you have significant assets to protect, or you do not qualify based on income.

Lawyer for Chapter 7 Bankruptcy in Northeast Philadelphia

The first reason why someone would not want to file under Chapter 7 is if they owned assets with significant equity. Equity is the value of an asset above and beyond any liens on that asset. For example, if you own a home that is valued at $200,000.00, and the amount remaining to be paid on your mortgage note is $100,000.00, the equity in your home is the difference of $100,000.00 (but slightly less when you subtract costs of about ten percent).

In this instance, you would be disadvantaged by filing for Chapter 7, because your unsecured debts would not be discharged unless you paid your creditors or surrendered your house. How much you would be required to pay your creditors would depend on how much debt you owed and how much equity you retain in your assets. If a debtor has equity in his or her house exceeding approximately $22,000.00, that means that he or she must either give up that asset or pay his or her unsecured creditors that unprotected amount of equity.

The second reason why a debtor would not file for relief under Chapter 7 is that he or she is not qualified. Chapter 7 allows for a quick discharge of debts without repayment, but in order for the debtor to get that benefit, his or her income must be below the average income in his or her state for his or her family size. For example, in Pennsylvania, the average income is about $50,000.00 for an individual. The income is calculated as an average over the previous 6 months. If your income falls below that threshold, this fact is sufficient for you to qualify for Chapter 7. If you have a higher income, you may still qualify based on the means test, and based on the number of dependents in your family. It is important that you speak to a qualified attorney regarding these calculations, as they may prove crucial in your case.

This content was written on behalf of Greg Prosmushkin.