Legal Question in Bankruptcy in Pennsylvania

Re: Should I file Chapter 7?

The decision to file bankrutpcy is highly individualized and personal. Depending on the type of debt and the assets you have, you may be better filing a Chapter 13, which would allow you to repay your creditors an amount less than the total you owe over a period of a few years. If all of your debt is unsecured, and you have no assets, a Chapter 7 might be best. While you are right to worry about your credit rating, chances are with $50k worth of debt and no assets, you don't have a high credit score currently. It's best to speak to a lawyer personally who can discuss all the facts of your particular case. If you have any questions, please feel free to call me.

Re: Should I file Chapter 7?

Short answer -- I would lean towards filing. You have a large amount of unsecured debt. Since you are employed and currently have no creditors beating down your doors you are in an excellent position. Most people do not realize that bankruptcy law is in some significant ways similar to tax law. A good lawyer can advise you to best position yourself to take full advantage of bankruptcy relief. Read my firm's philosophy. No one ever questions people taking advantage of tax saving measures. Why should bankruptcy strategy and planning (called in the industry "pre-petition planning") be viewed with skepticism.

Your question indicates that you are hesitant because of the potential effects on your credit rating. However your debt ratio to income is not very appealing. Often a bankruptcy IF COMBINED WITH A PERSONAL DECISION TO USE CREDIT PRUDENTLY will improve your credit. There are several strategies I utilize that allow filers to keep at least one credit card for use after the end of the bankruptcy proceeding.

The key test in terms of your specific situation will be gauging your monthly income and comparing this to your monthly expenses. A required part of any bankruptcy filing under Chapter 7 or 13 is a detailed list of your necessary monthly living expenses. This is an estimate however it should be relatively accurate. This monthly list would include such items as rent, car payments, food, utilities, etc. You would not include any payments of unsecured debts.

Basically, if your monthly expenses when subtracted from your monthly net income leaves you with substantial excess cash then Chapter 7 is not for you. Certainly if you become a victim of the increasing tide of corporate "downsizing" then the math becomes self-evident. ph. (800) 303-0720

Re: Should I file Chapter 7?

As you may know, there are generally two types of bankruptcies for consumers, Chapter 7 and 13. The former is generally for those who simply require the elimination of unsecured debt such as credit cards. The latter is generally for those who have fallen behind in secured debt such as a mortgage. Chapter 13 allows you to repay any arrears over five years.

A bankruptcy protects just about all consumer assets. There is a $16,000.00 minimum homestead exemption in your principal residence per person. The contents of your home, if any one item is not worth a great deal, are exempt up to at least $8,000.00. There are many other exemptions, as well. Vehicles are exempt to a minimum amount of $2,400.00 and, if you do not own real estate, there is what is commonly known as the "wildcard" exemption. You may use up to one-half of the homestead exemption for any asset you want to protect.

An exemption is a dollar amount assigned to an asset so that, if a Trustee ( the person charged with liquidating assets) were to attempt to sell such an asset, he would have to pay the exemption amount to you. Since the stated exemptions usually cover the value of the assets, most consumer cases are determined to be "no asset". Thus, you simply obtain a discharge of your debt.

Credit is evaluated, not just on payment history, but also your debt to income ratio. Yours is probably high and you will find it difficult right now to obtain major financing. Consequently, a bankruptcy actually improves your credit in that your debt ratio is significantly improved.

Also, you cannot overlook the tremendous savings by obtaining a discharge. The difference between paying everything off in full and paying nothing is a tremendous incentive to file. It simply is a wise business decision.

Bankruptcy, like many decisions, is a business tool. It has been used by some famous people. One of them was Harry Truman who filed before he took public office. Abraham Lincoln represented clients in bankruptcies. The list is quite lengthy of the Who's Who of bankruptcy. Of course, major businesses file all the time, most recently K-mart. If K-mart can file, so can you.

I trust this has been helpful, but feel free to call or e-mail with further questions.