At the core each chapter of Bankruptcy Law, whether a consumer or a business matter is “affordability.” Generally, there are three different areas where it might be deemed “affordable” for one to repay their debts or a portion of their debts outside of a typical Chapter 7 Bankruptcy. Below there are three main sections of perceived affordability under the law and when a Chapter 7 Bankruptcy may not be the best option for the consumer filer. This article is to make the consumer aware of the pitfalls in what some may consider a less complex Chapter 7 case and why effective assistance of local counsel is so important to guide and protect bankruptcy filers.
1. Assets. In Chapter 7 Bankruptcy, most matters are deemed “non-asset” cases. Meaning, that consumer filers may own real estate, vehicle(s), and personal property and retain such possessions, so long as the property is properly listed and exempted/protected through the bankruptcy system.
Federal bankruptcy exemptions are governed by 11 USC Section 522. These exemptions detail how much value in an asset may be exempt. Most bankruptcy litigation or trustee involvement ensues when a consumer debtor unknowingly fails to properly exempt or protect their assets. I have successfully intervened in bankruptcy matters where homeowners were on the brink of losing their homes, for no reason, but, incorrect listing of an asset or a properly applied bankruptcy exemption. In summary, proper assistance of counsel is necessary for a fresh start, but it is most important that your assets are protected as well along the way!
2. Income. Since the “new” bankruptcy law was implemented in 2005, means testing in Chapter 7 bankruptcy (Form 122A-2) has been made part of a Chapter 7 Bankruptcy Petition. Prior to the 2005 Bankruptcy law change schedule “I” and Schedule “J,” respectively provided a detailed summary of the petitioners’ monthly income and expenses. It is important to keep in mind when filing a Chapter 7 Bankruptcy matter, that even though one may be deemed a below median income debtor for purposes of Form 122A-2, there are circumstances where perceived affordability still exists on forms “I” and “J.” Generally, affordability will exist in cases of low or moderate expenses if debts were forgiven and therefore providing affordability to pay towards the debt outside of Chapter 7 Bankruptcy.
3. Anticipated Receivable(s). Whether from an inheritance, personal injury law suit, collection law suit, trust, divorce settlement or otherwise, it is most important to properly list and protect the anticipated receipt of future funds, otherwise funds can not be fully exempt or protected and the Chapter 7 can be deemed an asset case and held open. If the Chapter 7 is held open, the trustee will not grant a discharge of debt in the due course and the bankruptcy filer could ultimately pay a substantial portion of their debt from the receivable of money.
Sadek and Cooper has assisted over 4,000 filers in the Greater Philadelphia area. It is our passion and chosen career paths to provide the ultimate debt relief experience while protected your income and assets along the way! For a free and confidential consultation with a local lawyer in the Greater Philadelphia area, please call us 24 hours a day at 215-545-0008.