Following the slow economic decline of the United States and Pennsylvania in particular during the ongoing global recession, more and more residents of our state have begun investigating the potential debt management solutions of Chapter 7 and Chapter 13 bankruptcy protection as a method in which Pennsylvanian borrowers may exterminate their unrelenting debt burdens once and for all. Certainly, with household debt burdens (credit card accounts, unpaid taxes, secured loan balances, and the quickly escalating obligations that medical operations and unforeseen periods of hospitalization inevitably entail) rising by the day for average Pennsylvania families, every borrower that cannot justifiably plan the swift and complete erasure of all of their unnecessary bills should look into all of the various possibilities that exist, and bankruptcy most assuredly remains the most well known alternative to traditional measures of repayment. Sadly, however, through their journeys of discovery, many of the Pennsylvanian consumers have learned that bankruptcy may not be the last, best hope for a fresh start once depended upon throughout our country. Most Pennsylvania borrowers are at least somewhat familiar with the superficial aspects of bankruptcy protection – nobody petitions the courts for an end to their consumer debts without the expectation of some sacrifice for the affected families and, at the least, significant and lingering damage to their credit reports – but the massive changes resulting from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has savaged past preservations and made Chapter 7 bankruptcy far more onerous for Pennsylvanian borrowers to even attempt to obtain. Much as the drive to erase unsecured obligations from the family ledger should be applauded, Pennsylvanians must also ensure that they do not make their family’s financial situation even more tenuous by simply relying upon the governmental protections without examining in detail each and every repercussion that Chapter 7 and Chapter 13 bankruptcy could feature.
For some Pennsylvanians with minimal property and scant income history, bankruptcy declaration may still be an effective way of reducing their family’s outstanding financial burdens, but the ordinary household has to be extremely careful before they enter any formal agreements from which they could not easily be withdrawn. There are so very many different elements of bankruptcy declaration for Pennsylvania borrowers to study prior to their initial petition that, unless they could easily afford the advice of attorneys experienced in both Pennsylvania regulations and the federal legal guidelines, each step along the way must be closely examined. For instance, the security of their residence following bankruptcy declaration should be of paramount importance to the home owners living in Pennsylvania. However, to be absolutely sure that their family shelter (which is also, in all likelihood, the most valuable investment the Pennsylvania family shall ever attempt) would be exempted under the statutes enacted by either the Pennsylvania or United States Bankruptcy Codes, the borrowers should examine both the amount of money owed on their mortgage balance and the estimated value of their home. Not that borrowers should necessarily go ahead and pay the money for an appraisal prior to filing bankruptcy papers, but, even with the depreciation in real estate seen everywhere in Pennsylvania from Pittsburgh to Philadelphia, home owners should keep in mind that the homestead exemption provided by the federal legislature only protects those dwellings – which include mobile homes and co-ops as well as traditional single family residences – with equity values below twenty thousand dollars.
However, if the equity of their residence is not a leading concern, most of the borrowers in Pennsylvania suffering through the various indignities of Chapter 7 bankruptcy protection would be better served by taking advantage of the exemptions provided by the Pennsylvania legislature. Borrowers must initially choose between the state or federal exemption schemes rather than picking out elements of both that appeal to the various household needs. Within the Pennsylvania slate of bankruptcy exemptions, borrowers can keep the family bible and all educational literature, sewing machines (even industrial variants), and all clothing, uniforms, or other apparel. Funds specifically tailored for retirement accounts are preserved as well as pensions, annuities, insurance proceeds, social security benefits, and most forms of public assistance including workers’ compensation. Unpaid wages or judgments are ignored up to values of three hundred dollars. Once again, whether or not these Pennsylvania exemptions would be preferred when compared to the federal exemptions depends entirely upon the peculiar family needs, and borrowers looking into Chapter 7 debt elimination bankruptcy should take the time necessary – or, ideally, discuss their case with Pennsylvania bankruptcy attorneys more than familiar with both the United States Bankruptcy Code and the local regulations – to make sure that they select the safeguards best fitting their own array of possessions and sources of income.
All of the preceding information still presumes that the interested Pennsylvania family would even be able to enter the Chapter 7 debt liquidation bankruptcy program. In the years following the BAPCPA legislation, only those heads of household that could prove that they made less than the median income for their state as determined by the United States Census Department would be considered eligible for Chapter 7 bankruptcy protection. Currently, though these figures are observably subject to constant fluctuation, single Pennsylvania consumers seeking Chapter 7 bankruptcy could not have earned more than forty three thousand dollars in the year before they submitted their bankruptcy petitions. Two person Pennsylvania households would have to have earned less than fifty thousand dollars, three person households would have to have earned below sixty three thousand, the figure’s set at seventy six thousand dollars for four person households, and the numbers continue to escalate with each additional member. Should the household have earned too much money for immediate Chapter 7 eligibility, there exists a separate means test within the United States Bankruptcy Code which looks at the Pennsylvania borrowers’ past six months of combined income before their bankruptcy petition as well as the monthly obligations for secured debts (again, this principally refers to car loan and home mortgage payments), child support obligations, payments toward back taxes, and educational expenses provided the payments toward whichever sort of school do not exceed fifteen hundred dollars per year. If the Pennsylvania court trustee finds that the family income – after deducting all of these payments plus the household cost of living – could not effectively support an additional one hundred dollars per month paid to the various unsecured lenders for the next five years (six thousand dollars in total), then the gates of Chapter 7 debt elimination bankruptcy could again be opened.
Unfortunately, when conducting the means test to determine the legitimacy of Chapter 7 bankruptcy petitions, the Pennsylvania trustee is bound by the restrictions explicitly stressed by the US Bankruptcy Code to consider only the day to day living expenses tabulated by the Internal Revenue Service which purportedly averaged out the Pennsylvanian household costs but, in actuality, drastically under-represented such. Since the trustee is forbidden to even examine the genuine expenses of the Pennsylvania family requesting assistance with their mounting consumer debts, few borrowers manage to pass this means test and are instead passed along to the Chapter 13 alternative. To be sure, some consumers who initially petition the Pennsylvania courts for bankruptcy protection actively seek out the Chapter 13 option even though the format does not eliminate – or even, to a noticeable degree, reduce – the credit card account balances or other unsecured debts. Much of the attraction that Chapter 13 bankruptcy protection holds for Pennsylvania residents surrounds the automatic stay that prevents any action by the creditors from the moment that the borrowers’ bankruptcy petition is accepted by the Pennsylvania county courts. The instantaneous cessation of collector harassment’s an added bonus, and some Pennsylvania consumers who’ve reason to fear wage garnishment or similar threats from their lenders (even if the lenders, in the case of unpaid child support or back taxes, would be the state or federal government) may well need the sudden break to re-organize their finances. However, by a large percentage, the average Pennsylvanian household that chooses Chapter 13 does so to thwart foreclosure or forbearance proceedings already set in motion by the mortgage companies against the family residence.
Once again, the Chapter 13 bankruptcy program does not do much of anything to lower the amount of money that Pennsylvania home owners may owe upon their mortgage (or, as has become all too common following the unchecked advances of predatory sub prime lenders, mortgages and equity loans), but Chapter 13 protection and the associated automatic stay do allow for the borrowers to re-work their original debts in a method more agreeable to household budgets. For some home owners around Pennsylvania whose creditors have originated foreclosure proceedings and resisted attempts toward communication, there simply may be no other way to finalize the safety of their primary residence, but, here too, the continuation of even re-structured mortgage payments may just be above the capacity of many Pennsylvania families given our current economic turmoil and households could wind up still losing their domiciles. To be completely honest, beyond the assistance toward home owners, there just doesn’t seem to be much purpose to the Chapter 13 bankruptcy solution. It is open to most every Pennsylvania resident – provided that they do not have more than a million dollars worth of secured debt and three hundred and thirty thousand dollars of the unsecured variety – but, unless the household truly feels that they cannot control their own budget and schedule of repayment without the assistance of an often disinterested Pennsylvania court trustee (who’ll, as with the Chapter 7 means test, be forced to construct said budget employing the cost of living expense figures compiled by the Internal Revenue Service), the destruction of credit ratings and sheer cost of the ever more necessary bankruptcy attorneys doesn’t seem to counter the minimal benefits that Chapter 13 bankruptcy protection provides Pennsylvania families.
Even the most popular alternatives to Chapter 7 and Chapter 13 bankruptcy programs utilized by Pennsylvania households inevitably betray the same sorts of problems (beyond asset forfeiture, obviously) upon sober analysis. Debt consolidation loans – which, during the current credit freeze affecting markets around the globe and the collapse of the sub prime lending industry, essentially depend upon collateral: i.e. primary residences – may well lower interest rates and monthly payments. However, few Pennsylvania home owners who understand how shaky property values in our state have been over the last year should be willing to forego their equity in exchange for a temporary reprieve of household burdens, and, since the principal cause of minimized payments remains the decades-long terms which equity loans and refinanced mortgages last, the effects of compound interest on debt consolidation means that the Pennsylvania consumers may pay double or even triple the original balance before everything’s all said and done. Pennsylvania households serious about an enduring solution to their assembled unsecured debt loads should be far more interested in methods that aim for immediate recovery. Debt settlement negotiation, to use the most profound example of a time sensitive debt management maneuver, efficiently carves away as much as two thirds of the original debt balances by promising creditors that the settlement clients in Pennsylvania or elsewhere in America would endeavor to repay what remains of the accounts in under sixty months (as well as wielding the threat of Chapter 7 bankruptcy should the lenders fail to barter down the debt loads). Settlement negotiation’s still a comparatively novel solution – many curious Pennsylvania residents should be obliged to take a look at one of the many certified debt settlement company websites – and not every Pennsylvania household shall be able to demonstrate the fiduciary capacity to make the heightened repayment schedule viable, but, with bankruptcy protection itself currently so treacherous a path, any alternative like debt settlement negotiation with such a record of unqualified success should be sought out and explored.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
