Chapter 7 Bankruptcy Attorneys in Ridley Park, Pennsylvania

Bankruptcy carries with it a certain stigma, such as giving up and coming out on the losing end of managing your affairs, but bankruptcy is actually a federally protected code that allows an individual or family to get a fresh financial start in life. For these people, there are generally two options under the code: Reorganization of debt known as a Chapter 13 filing, and liquidation of assets, or a Chapter 7 filing. However, the term "liquidation of assets" can often scare people. With the help of an experienced bankruptcy attorney and some planning, assets are very rarely liquidated and most times you get to keep everything in exchange for getting rid of most, if not all, of your unsecured debt.

If you are experiencing financial hardship and unable to keep up with your debt obligations in or around Ridley Park, Pennsylvania, contact us at Adams Kearney Law. Our bankruptcy attorneys will review your financial situation with you and advise you of the best legal path forward, including a bankruptcy filing. We will then help you navigate the system to obtain your fresh financial start.  

Adams Kearney Law also proudly serves clients throughout Delaware County, Chester County, as well as other surrounding counties and the greater Philadelphia area. 

What Is Chapter 7 Bankruptcy? 

Chapter 7 bankruptcy is known as the liquidation plan because it allows the bankruptcy trustee overseeing your petition to sell off certain assets to satisfy creditors. This is in contrast to a Chapter 13 filing, during which you can reorganize your debts and use your disposable income to satisfy debts, at least partially, over a three-to five-year period. 

Liquidation may sound scary, but sometimes, it is the best and perhaps only option, depending on your individual circumstances. There is also the possibility of using federal exemptions to protect your equity in your home and vehicle and other assets. And as we mentioned above, with the help of an experienced bankruptcy attorney and some planning, assets are very rarely liquidated and most times you get to keep everything in exchange for getting rid of most, if not all, of your unsecured debt.

What Chapter 7 Does Do

A Chapter 7 filing is the quickest route to discharging your debts and achieving a fresh start in life. It can be accomplished in a matter of a few months rather than three to five years under Chapter 13. Once you file, the bankruptcy court will issue what is called an “automatic stay,” which prevents creditors and bill collectors from contacting you or attempting to collect what’s owed.  

The phone calls, emails, and text messages will stop, and you won’t have to deal with that anymore. However, the stay for secured assets, such as for cars, homes, or other big-ticket items, will no doubt be challenged by secured creditors and the stay removed. If you are in arrears, foreclosure or repossession may result if you don’t renegotiate the terms of the loans. 

You will, moreover, have to attend a meeting of creditors. Most creditors will probably not show up, but if a creditor feels you have misled them or otherwise did something wrong, a representative may show up to challenge your petition. Though this is rare, it’s possible. After the creditors’ meeting, your assigned bankruptcy trustee will work with you on your assets and their potential liquidation to satisfy creditors, at least partially.

What Chapter 7 Doesn’t Do

Both the federal government and states can legislate exemptions for personal property in a Chapter 7 liquidation plan. The Commonwealth of Pennsylvania has what can be termed a minimal level of exemptions, allowing only a wild card exemption of $300 for personal assets, which can be used for whatever you choose. Unfortunately, there is no homestead exemption. 

However, and fortunately, Pennsylvania does allow you to use the more generous federal exemptions. The current amounts of these exemptions are good from April 1, 2022, through March 31, 2025, and include: 

• HOMESTEAD EXEMPTION: $27,900 for individuals and $55,800 for spouses who co-own property. There is also the possibility of exempting the home if it is held in tenancy by the entirety. 

• MOTOR VEHICLE EXEMPTION: $4,450 in equity.  

• TOOLS OF THE TRADE EXEMPTION: $2,800. 

• WILDCARD EXEMPTION: $1,475, plus an unused homestead exemption of up to $13,950. 

• PERSONAL PROPERTY EXEMPTIONS: Examples include $700 per item / $14,875 total for animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments; jewelry up to $1,875; personal injury recoveries up to $27,900; health aids; wrongful death compensation for a person upon whom you depended; and alimony and child support. 

• RETIREMENT ACCOUNTS: Up to $1,512,300 for IRAs and Roth IRAS. 

• PUBLIC BENEFIT EXEMPTIONS: Your public assistance, Social Security, Veteran’s benefits, unemployment compensation, and crime victim’s compensation are safe and won’t be touched. 

• INSURANCE EXEMPTIONS: A life insurance policy with a loan value of up to $14,875; disability, unemployment, or illness benefits; life insurance payments you depend upon from a person you relied on for support. 

Qualifying for Chapter 7

There is an income means test to qualify for Chapter 7. If your income is above the threshold based on your household size, you might be forced to use Chapter 13 instead. Note that your spouse’s income will be combined, even if you are filing individually—unless you are legally separated.  

The income thresholds for 2023 in Pennsylvania are $66,454 annually for a household of one, $80,321 for a household of two, $100,888 for a household of three, and rising all the way to $171,583 for a household of nine.