There are two courthouse locations for the United States Bankruptcy Court for the District of Eastern Pennsylvania: one court located in Reading, and a second court located on Market Street in Center City, Philadelphia. Regardless of which court handles your Chapter 13 bankruptcy case, your goal as a filer is to obtain a discharge, which will release you from liability from many of your debts. The question is, how long will it take for your case to be discharged? Our Philadelphia Chapter 13 bankruptcy lawyers explain how long Chapter 13 cases take to complete in Pennsylvania.
How Long Before Chapter 13 Bankruptcy is Discharged in Pennsylvania?
It’s important for debtors to understand that Chapter 13 bankruptcy is a lengthy process. Unlike Chapter 7, which resolves in a matter of months, Chapter 13 bankruptcy, which is more legally, financially, and procedurally complex than Chapter 7, lasts for a period of three to five years, or 36 to 60 months.
The reason Chapter 13 bankruptcy takes three to five years to complete is that it includes a feature known as the “reorganization” plan (which is also why Chapter 13, like Chapter 11, is sometimes described as reorganization bankruptcy). In plain terms, the reorganization plan is a plan you create with your attorney, subject to approval by the court-appointed trustee, which requires you to make payments over a period of three to five years.
The benefit of making these payments is that you will be permitted to keep your property – which, bankruptcy exemptions notwithstanding, might have been sold off by the trustee had you filed under Chapter 7. You can even use Chapter 13 bankruptcy to save your house from foreclosure by catching up on missed mortgage payments, which is another matter our Philadelphia foreclosure defense lawyers can help you with if you are worried about losing your home.
Before you are permitted to declare Chapter 13 bankruptcy in Pennsylvania, you will need to prove to the bankruptcy court that you have enough disposable income to afford continuous, timely payments to creditors under a reorganization plan. For this reason, certain debtors are excluded from filing under Chapter 13. For instance, you may be required to file under Chapter 7 if you are unemployed and have no disposable income, or if your median household income is lower than that of a Pennsylvania household of equivalent size.
Conversely, you may be required to file under Chapter 13 if the court determines you have the financial means to successfully accommodate a reorganization plan. In fact, the test that determines whether you have enough disposable income for Chapter 13 is called the means test for this very reason.
What Happens When My Bankruptcy Case is Discharged?
If you adhere to your reorganization plan, pay all of your court fees, submit all required documentation in a timely manner, make all of your required court appearances, refrain from engaging in fraudulent activities, comply with tax laws, and complete bankruptcy’s creditor counseling and debtor education requirements, your case can be discharged after three to five years.
So then what happens?
It can be challenging for a filer to see a Chapter 13 reorganization plan through to the end; but successful completion of your case can yield immense financial rewards. Once your case is discharged, you will no longer be considered liable for the dischargeable debts that were included in your Chapter 13 reorganization plan, such as credit card debt, medical debt, and debts arising from personal loans, breach of contract, and divorce property settlements. That means those creditors can no longer contact you, nor can they initiate new legal proceedings, in order to pursue payment of the discharged debts.
There is also an added benefit to completing a Chapter 13 bankruptcy: once you have been relieved of your liability for dischargeable debts, you will have the financial breathing room you need to start repairing your credit for the future. Your credit score will initially drop, but with many of your debts eliminated, you will be able to make timely payments on utility bills and other expenses, which will gradually cause your credit score to improve.
Philadelphia Chapter 13 Bankruptcy Attorneys Serving Bucks and Delaware County
Chapter 13 may seem like an intimidating process, but you shouldn’t let that stop you from exploring bankruptcy as a possibility for resolving your financial issues. Chapter 13 bankruptcy can help you save your home from foreclosure and keep your most precious possessions while simultaneously reducing your debt and setting you up to start building good credit in the future.
Further, you won’t have to handle your case by yourself. You will have an experienced bankruptcy attorney in Philadelphia to guide, counsel, and support you at every stage of the process; and, should your financial circumstances change while the case is underway, it may be possible to convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy with assistance from a Philadelphia Chapter 7 lawyer.
If you need help avoiding foreclosure or managing burdensome debt, Chapter 13 bankruptcy may be an effective legal strategy. Otherwise, you may be a suitable candidate for Chapter 7 bankruptcy, or one of the various alternatives to bankruptcy, such as debt consolidation. To talk about your legal options in a free and confidential bankruptcy consultation, contact Sadek & Cooper Law Offices at (215) 995-2543 today. We serve clients throughout the Philadelphia region, including Bucks County and Delaware County.