Legal Question in Credit and Debt Law in Pennsylvania

When you have difficulty paying your debt, you have 3 options, negotiate, ignore, or bankruptcy. A lawsuit will likely result in a judgment and can also result in loss of bank accounts and personal property.

There are generally two types of bankruptcies, 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 $20,000.00 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 $10,000.00. There are many other exemptions, as well. Vehicles are exempt to a minimum amount of $3,500.00 and, 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.

Because you are a sole-proprietor, you are the business. Therefore, your discharge would cover your business as well. As long as you don�t operate out of a storefront, you will be able to run the business during the case.

You should speak with experienced bankruptcy counsel to discuss all the ramifications.

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