Consumers in Pennsylvania, like the rest of the country, have overextended themselves through credit card purchases and other debt. One of the legal means to resolve these debts and seek a financial fresh start is to declare Chapter 7 bankruptcy. Choosing to utilize this type of filing depends on their financial situation.
An individual has the option to file for Chapter 7 or Chapter 13 bankruptcy. Chapter 13 bankruptcy is a repayment assistance plan. Chapter 7, however, is usually reserved for debtors who are insolvent. A trustee is appointed to the debtor’s case to sell their property unless the property is exempt.
Chapter 7 is used by debtors who lack valuable assets or don’t have much equity in their home or car. Chapter 7 allows a debtor to eliminate all unsecured debt and keep secured debt and associated assets if they continue to make payments. Physical property, such as a house or a car, is classified as secured debt, while unsecured debt is unconnected to an asset.
Filing for Chapter 7 is a better option for a person who recently became unemployed, has no income or has insufficient income to pay all of their debts. In other words, their income cannot keep pace with their debt. This allows the debtor to erase their debt and recover financially.
Emerging from Chapter 7 bankruptcy requires a person to show solvency and the ability to make sensible financial decisions. This requires a person to return to work if they are unemployed. Working individuals must demonstrate that they are making regular payments and can keep their home and cars.
Before filing for bankruptcy, a person should discuss their options with an experienced attorney. This can help ensure that they review the choices that will best protect their finances, property and credit.