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A Chapter 13 bankruptcy, as previously discussed in blogs and on the primary website, www.sadeklaw.com, is a repayment plan in bankruptcy.  The repayment plan is the most distinguishing characteristic of a Chapter 13 Bankruptcy Proceeding.  The repayment plan, generally, rather than being based on what is due and owing, with respect to unsecured debts, is based on affordability on an ongoing monthly basis.  There are several reasons why a person or married couple may file a Chapter 13 Bankruptcy, however, in my Pennsylvania Bankruptcy law firm, I see three most common situations.

1. Stay Foreclosure Foreclosure or Tax Sale of Real Property,

2. Repayment of debt based on non-exempt equity in real or personal property and

3. Repayment of Debt based on means testing disposable income.

A Chapter 13 Bankruptcy may be filed to stay mortgage foreclosure or tax sale up until the time the sheriff sale takes place.  In Chapter 13 bankruptcy an individual or a married couple would repay all mortgage arrears and/or tax deficiencies due and owing over a period of three to five years, depending on monthly disposable income.  The filing of a Chapter 13 Bankruptcy, by virtue of the automatic stay imputed under Section 362 of the US Bankruptcy Code, stays the foreclosure or tax sale.  Moreover, unsecured debt, including but not limited to credit cards, personal loans, utilities, judgments and medical bills are paid back based on affordability.  Sometimes Petitioners in Chapter 13 Bankruptcy pay nothing back to unsecured creditors.

The current federal exemption for equity in real property is $21,625.00, per person on the deed.  Meaning a couple whether filing jointly or not has a combined exemption of $43,250.00 for their personal residence.  For example, a couple with a mortgage of $100,000.00 and a house worth $143,250.00, would be deemed to have no non-exempt equity in their primary residence.  However, if the value of the house was higher, then the individual or couple would pay debts back only up to the non exempt equity in the subject primary residence.

Lastly, Chapter 13 Bankruptcy is supposed to be based on the Debtors’ best efforts to repay.  Accordingly, there are means testing figures, updated annually for inflation.  Such figures consider family size and reasonable and necessary expenses to determine, what amount, if anything needs to be paid towards debt on a regular and monthly basis through Chapter 13 Bankruptcy.  The lawyers at Sadek Law Offices are well versed in Pennsylvania means testing and will give an honest legal opinion regarding required payments and savings in Chapter 13 Bankruptcy.

If there are any general questions or topics you would like to read about relating to bankruptcy law in the Eastern Pennsylvania region, you may contact the Bankruptcy Lawyers at Sadek Law Offices, LLC at 215-545-0008 or 610-432-3111 or email [email protected]. Thank you.