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 Philadelphia

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

If a debtor doesn't have to pay anything to her creditors in a Chapter 7, and it’s so fast, you would think that everyone would want to file for relief under Chapter 7. However, there are two reasons why a debtor would not want to file for Chapter 7: either you have too many assets to protect, or you don’t qualify by income.

Lawyer for Chapter 7 Bankruptcy in 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 if subtracting costs of about ten percent).

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

The second reason why someone would not file for relief under Chapter 7 is because they are not qualified. Chapter 7 allows for a quick discharge of debts without repayment, but because the debtor gets that benefit, her income must be below the average income in her state for 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, it is presumed that you 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.