Chapter 7 Bankruptcy in Pennsylvania

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy eliminates debts, stops collections and creditor harassment, and allows people to get a fresh start. In over 90 percent of Pennsylvania Chapter 7 cases in Pennsylvania, debtors keep all of their personal property, including vehicles. It is even possible for many debtors to keep their homes in Chapter 7.

Debts You May Eliminate Under Chapter 7

With a few exceptions, Chapter 7 eliminates debts, including:

Chapter 7 stops collections, lawsuits, foreclosures, sheriff's sales, lawsuits, bank levies, and garnishments, utility shutoffs, etc.

Quick Note: Although it is primarily used by consumers, businesses can also use Chapter 7 to liquidate and terminate their operations.

Debts Generally Not Dischargeable in Bankruptcy

Some debts may not be discharged in bankruptcy in most circumstances, such as

  • Student loans (unless you can show undue hardship)
  • Alimony and child support
  • Damages awarded for personal injury to someone else resulting from DUI
  • Criminal fines, restitution, and court fees
  • Taxes that do not meet the dischargeability rules
Quick Note: Some income tax is dischargeable in Chapter 7.

Property You Can Keep In Chapter 7

Up to a specific limit, most personal property is exempt, which means that you can keep it. In most consumer bankruptcy cases, debtors keep all of their personal property. Moreover, many debtors can keep their homes if they are current on their payments and do not have too much equity. Exempt property that you can keep includes:

  • Equity in your home
  • Motor vehicles
  • Clothing
  • Household goods and furnishings (the contents of an average house)
  • Household appliances
  • Jewelry
  • Pensions, including money in 401k plans
  • Tools of the debtor's trade or profession
  • A portion of unpaid but earned wages
  • Public benefits, including public assistance, Social Security, and unemployment compensation
  • Damages awarded for personal injury

Because of these exemptions, most debtors do not lose property in Chapter 7 bankruptcy. An experienced bankruptcy attorney will be able to tell you if there is a risk to any of your property before you file.

The Chapter 7 Process

The Documents. To see if Chapter 7 is right for your situation, your attorney will review your financial information. If Chapter 7 is appropriate, your lawyer will prepare a bankruptcy petition, schedules, and associated documents. After you review these documents with your attorney, your case will be filed in the local bankruptcy court.

The Hearing. In most cases, you do not have to appear before a judge. However, you will have to attend a short hearing held by the Chapter 7 bankruptcy trustee called the "meeting of creditors." At the meeting, the trustee will review your petition and schedules and ask some questions. These meetings are usually short (five to fifteen minutes), and your attorney will be with you.

The Discharge. About three months after the meeting, you will receive a discharge of your debts signed by the judge. The discharge is an order issued by the court that permanently ends your liability for the debts that you listed in your bankruptcy. You are now debt-free.

The Timeline. From the date of filing to the time you receive your discharge takes about four months in most Philadelphia area Chapter 7 cases.

Chapter 7 is not the right choice in every case, and there are alternatives. Other options include Chapter 13, debt negotiation/debt settlement, debtor defense, foreclosure defense, mortgage modification.

If you would like to speak to an experienced Philadelphia area bankruptcy attorney about Chapter 13 or other options available to you, call us at (215) 248-0989, send us an email, or use our contact form.

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