How Long Will It Take to Start Over?
You’ve been paying the minimum payment due for months and the overall amount you owe keeps getting higher. You have medical bills past due with no means to pay them. The debt you owe continues to increase and you can’t see a way out; if this sounds like you, it may be time to schedule a consultation with a consumer bankruptcy attorney to discuss Chapter 7 bankruptcy.
Is Chapter 7 Right for Me? How Does it Work?
Chapter 7 bankruptcy is a legal tool that allows the debtor—the person filing bankruptcy—the ability to sell off assets in order to get out of debt. Simply put, money from your assets will be divided amongst your creditors. What remains of your unsecured debt will be forgiven, meaning you will no longer owe that debt.
Chapter 7 may be right for you if you…
- have been struggling to survive month to month,
- have more than $10,000 in dischargeable debt (see below),
- already have a credit score below 600, and
- do not have high amounts of equity in your home.
Chapter 7 is income dependent; to qualify you will need to pass the bankruptcy means test. If you make below the median income in your state, you will qualify to file. In Pennsylvania, the median income for a family of four is $8,761.50 monthly or $105,138 annually.
If you make more than the median income in your area, you may still pass the test. The means test calculator utilizes your monthly income and expenses to determine eligibility. For example, the calculation used for a family of four, with a mortgage, in Philadelphia, Pennsylvania is compared to the $8,761.50 monthly income cap, along with the allowable monthly expenses for Philadelphia County of $1,143.
What debts can be discharged?
- Credit cards
- Medical bills
- Auto loans
- Utility bills
- Personal/payday loans
What debts cannot be discharged?
- Unpaid child or spousal support
- Back taxes
- Past due government fines
- Student loans
Chapter 7 Timeline—How Long Does It Take?
The first step to filing bankruptcy is to complete the required credit counseling provided by a U.S. Trustee approved counseling service. From there you must wait 180 days before filing.
In those 180 days you should have more than enough time to produce the necessary documentation and legal forms. The Chapter 7 Checklist published by NOLO provides a comprehensive list of requirements. A skilled Chapter 7 bankruptcy lawyer can guide you through this process.
The cost of a bankruptcy attorney in Pennsylvania generally ranges between $995 and $1,450. Many firms offer flexible payment plans to help ease the financial burden of seeking a professional to help you through an already financially strenuous time. Bankruptcy attorneys providing Chapter 7 services generally require their fees be paid in advance of filing your case with the court.
After filing, you will meet with your assigned trustee; generally, within a month or two. A second credit counseling course is required to be completed within 60 days of this meeting.
Barring any major issues, you may be officially discharged from your eligible debts three to five months after filing a Chapter 7 bankruptcy.
If you make a modest income and owe a high amount of dischargeable debt, it may be time to schedule a consultation with an experienced local bankruptcy attorney to discuss filing for Chapter 7. In less than a year your financial stress can be lifted with debts forgiven, giving you a fresh start.