Types of Bankruptcy

Types of Bankruptcy

Most people are already familiar with phrases like “filing for bankruptcy” or “declaring bankruptcy.” What fewer people realize is that there are different categories of bankruptcy, which are known as bankruptcy “chapters.”

Before you file bankruptcy in Pennsylvania, it’s important to make the right decision about which chapter of bankruptcy is best for your situation. There are major differences between each chapter of bankruptcy, which can have both short-term and long-term impacts on your case. The chapter you choose will affect the debts you can erase, how long your case will last, the forms you must complete, and other critical factors in your case.

This short informational guide will help you understand the key differences between Chapter 7 and Chapter 13, which are the most common types of bankruptcy used by Pennsylvania residents. Continue reading to learn more about which chapter of bankruptcy is right for you. Then, contact the Philadelphia bankruptcy lawyers of Sadek and Cooper Law Offices, LLC at (215)-545-0008 for a free bankruptcy consultation.

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Chapter 7 vs. 11 vs. 13 Bankruptcy

The different types of bankruptcy are called “chapters” because they are named after various chapters of the U.S. Bankruptcy Code. While there are many chapters of bankruptcy in Pennsylvania, most people choose to file using one of the following options:

  1. Chapter 7 Bankruptcy (Straight Bankruptcy, Ordinary Bankruptcy, Liquidation)
  2. Chapter 13 Bankruptcy (Wage Earner’s Plan, Reorganization Bankruptcy)

Chapter 7 and Chapter 13 have several features in common, but also have significant differences. Factors they share are that both chapters can:

  • Help you eliminate or reduce many of your debts, including medical debt, credit card debt, business debt, and debt from personal loans.
  • Provide temporary, automatic protection from debt collectors, repossession, and foreclosure through a bankruptcy feature called the “automatic stay.”
  • Give you the ability to build better credit in the future by relieving most of your debts.

While both chapters can alleviate financial problems by erasing or restructuring debt, they differ in terms of the procedures and regulations that apply. Major differences between Chapter 7 and Chapter 13 include the following:

  • Chapter 13 takes longer to complete. Chapter 7 cases typically conclude in as little as six months, while Chapter 13 requires a period of three or five years to complete, depending on the circumstances.
  • In Chapter 7, a court-appointed bankruptcy trustee may liquidate (sell) your property to repay your creditors, unless the property is protected by bankruptcy exemptions. There are many situations where either (1) exemptions protect most or all property, or (2) the trustee declines to sell the property because the property’s value is negligible. In Chapter 13, you keep all of your property, but are required to make monthly payments to the trustee, who then divides the money amongst your creditors in order of importance.
  • Both chapters allow you to reduce or erase (“discharge”) many debts. However, you can discharge a few additional debts in Chapter 13 that cannot be discharged in Chapter 7.
  • Both chapters can temporarily postpone foreclosure due to the automatic stay. However, only Chapter 13 can prevent foreclosure, because unlike Chapter 7, Chapter 13 gives you time to catch up on missed mortgage payments.
  • There is a $335 filing fee to declare Chapter 7 in Pennsylvania. The Chapter 13 filing fee is slightly lower at $310.
  • If you have too much income, you might be prevented from filing Chapter 7.

Chapter 11 is also relatively common, though used less frequently than Chapter 7 or Chapter 13. Chapter 11 is primarily designed for businesses, and is usually utilized by large franchises and corporations due to the complexity of the process, which can be burdensome for smaller or fledgling companies. In exceedingly rare cases, Chapter 11 is used by individuals who have too much debt to file Chapter 13, but also too much income to file Chapter 7. Continue reading below to learn more about business bankruptcy for C corporations, S corporations, partnerships, limited liability companies (LLCs), and sole proprietorships in Pennsylvania.

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Types of Bankruptcies for Businesses in Pennsylvania

“Personal bankruptcy” or “consumer bankruptcy” refers to bankruptcy for individuals and married couples. As the name implies, “business bankruptcy” is bankruptcy for business entities. Depending on what type of business you operate, how much debt the business has incurred, and what your goals for the business are, it may be appropriate to file Chapter 7, Chapter 11, or, if you are a sole proprietor, Chapter 13.

If your business is structured as a corporation, partnership, LLC, or sole proprietorship, you may file Chapter 7. Chapter 7 allows you to eliminate many of your business debts, but will also result in liquidation, and ultimately, closure of the business. If you wish to keep the business open during and after the bankruptcy, you will need to file Chapter 11, which involves long-term debt restructuring as opposed to liquidation in Chapter 7.

Similar to Chapter 11, Chapter 13 allows businesses to continue operating while their cases are pending. However, Chapter 13 is unfortunately not a filing option for most business entities. The only type of business that may file Chapter 13 is a sole proprietorship, in which case the sole proprietor keeps the company’s assets while paying off debts gradually. If you are a small business owner in Philadelphia or other areas of Pennsylvania, Chapter 13 might be the right bankruptcy option for you. Our bankruptcy lawyers in Philadelphia can help you make an informed decision about your company’s financial future.

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Philadelphia Bankruptcy Lawyers Can Help Eliminate Debt

If you need help managing debt that has grown financially overwhelming, bankruptcy could be the solution. Bankruptcy allows you to shrink or eliminate numerous debts, while the automatic stay gives you time and space to create a viable plan for dealing with your future obligations. Whether you want to file on your own, with your spouse, or as a business owner, bankruptcy can help you get your debts under control so that you can escape financial hardship and gain a clean slate.

Sadek and Cooper Law Offices, LLC handles bankruptcy cases in Philadelphia, Bucks County, Montgomery County, and Delaware County, including Ardmore, Bristol, Broomall, Chester, Croydon, Drexel Hill, King of Prussia, Lansdale, Levittown, Morrisville, Norristown, Pottstown, Quakertown, Willow Grove, Yeadon, and many other communities in the Southeastern Pennsylvania area.

To learn more about the benefits of filing for Chapter 7 or Chapter 13 bankruptcy in Pennsylvania, call the Philadelphia bankruptcy attorneys of Sadek and Cooper Law Offices, LLC at (215)-545-0008 for a free legal consultation. We will keep your information confidential.

 

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jammee burhannon
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12:39 08 Aug 18
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Krystal Stewart
Krystal Stewart
14:22 18 Jul 18
Matt Lazarus and the rest of the firm were absolutely wonderful. They held my hand through the whole process of my bankruptcy and made sure I knew what was happening every step of the way. They worked with my schedule and location to make every step as easy and smooth as possible. If every I need any legal advice in the future, I know exactly who I'm going to!
Matthew Justice
Matthew Justice
07:11 16 Jul 18
Brad Sadek has no equal when it comes to Foreclosure defense and bankruptcy. He is knowledgeable about the whole thing. It actually gave me confidence during the case.
Landlord Guy
Landlord Guy
16:25 06 Jul 18
Well... About a year ago I was faced with an unpleasant (but necessary) decision. I contacted Sadek and Cooper to make an appointment and ended up speaking with Brad. I brought all of the required/requested information and we did some calculations together (I like numbers) to see what my options were. The process was relaxed and transparent, and his advice was neutral and objective (in my opinion). I ended up filing for CH13, which allowed me to keep my property. I worked with Matt for the remainder of the process. He was communicative, helpful, and very patient with someone like me who asks A LOT of questions. If you're going to go for CH7 or CH13 I'd suggest at least talking to Sadek & Cooper to get an idea of what your options are. And if you decide to go through it with them I can't imagine you'll be disappointed (as lond as YOU do what's required on time, etc. of course). We're talking about court here, so it's best to be early and over-prepared for everything. I hope I never have to use their services again (for obvious reasons lol), but I'm certainly very happy that I DID when I needed to. They helped me tremendously and it has been SMOOTH SAILING since my CH13 plan was approved. I wish them all the best and look forward to the end of my CH13 and it being cleared from my record eventually. If you're considering CH7 or 13 DO your RESEARCH. Don't be "afraid", educate yourself, be an INFORMED consumer. And go talk to Sadek & Cooper for some SOUND advice and a good analysis of your options! SOONER rather than LATER. Don't wait until the last minute.
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17:12 22 Jun 18
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Jamie Daniels
Jamie Daniels
13:20 20 Jun 18
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Alicia Green
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14:16 22 May 18
My experience with Sadek and Cooper was awesome. They were extremely helpful with answering all my questions and made me feel comfortable and less anxious about filing for bankruptcy. The process was smooth and quick and had no issues at all!Alicia
Selena Pinkney
Selena Pinkney
13:52 22 May 18
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Ethan Hew
Ethan Hew
13:44 16 May 18
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Chris Jamison
Chris Jamison
19:52 04 May 18
Matt Lazarus from the start was very helpful with making me filing for bankruptcy as easy as possible. It is one of the hardest things to go thru in life. But you have to look at it as a new start. Thank you again to everyone at Sadek & Cooper for all your help.
Thomas Wright
Thomas Wright
15:09 24 Apr 18
Sadek and Cooper Law did a great job on my bankruptcy case. I really appreciate their assistant. Thank you
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Kelly McKenna
11:57 19 Apr 18
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Dessiana Cruz
Dessiana Cruz
13:11 04 Apr 18
I was nervous about bankruptcy, but from the moment I stepped in your office I felt at ease. This process was so easy with your help, that yesterday I was talking to my coworkers about it and recommending your firm to them. You make something that’s scary seem easy and I thank you so much for helping me!
Valerie Nesbitt
Valerie Nesbitt
14:51 03 Apr 18
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Marlena Lucas
Marlena Lucas
16:08 02 Apr 18
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James Smith Sr
James Smith Sr
13:19 14 Mar 18
Everything has been great. Really awesome job with my case... You and your staff have done a perfect job in my opinion.
Michkel Davis
Michkel Davis
17:02 09 Mar 18
Mr. Sadek was the best and most thorough lawyer I’ve ever met. He’s very human and caring about our case. His whole staff is great too. Highly recommend...
Tamika Richardson
Tamika Richardson
14:56 01 Mar 18
My bankruptcy went very smoothly with your firm. No issues. You are all very nice. That’s why I recommend my sister to your firm and your now helping her too! Thanks again.
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Geraldine Ross
14:14 28 Feb 18
This is an Excellent firm to work with; my questions were answered in a timely manner and I felt very supportive in handling my bankruptcy. I would highly recommend this firm to others who have found themselves in a position like mine.
Lavern Baker
Lavern Baker
17:03 23 Feb 18
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peter b
peter b
19:42 21 Feb 18
Thank you, Sadek and Cooper Law offices for your dedication on my behalf. I appreciate Matthew and Patrick and your staff and all that everyone did to support me in this legal matter. You took an embarrassing, sad experience, for me, and turned it into a successful solution without all the emotional pain expected. After dealing with a loan modification company for over eighteen months without going to an attorney first that is the biggest mistake anyone can make. The Modification Companies set out to sell you lies, broken promises and dilute the homeowner's assets with no knowledge of any kind of law. I can't stress enough stay away from Modification companies, as a Military Veteran and family man, protect you or your family best interest. Go directly to Sadek and Copper you will not regret it! This firm moves with Super speed and diligence protecting you and your family's the entire process, even after watching some of these other attorneys in the courtroom appearing to mishandled their clients’ cases before the Trustee. You made it easy and I’m finally getting my financial life back on track! Thank you for your prompt replies to me, your clear information and preparation needed when at the courthouse. I would of course recommend you to others and I am glad you were the one who had my case. Kind genuine law firm who treats you like family. God bless you all and I pray for your continued success in your field of expertise. This firm is Super Lawyers for a reason. They are the best at what they do! Pete
Doug Tinlin
Doug Tinlin
06:55 15 Feb 18
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Jacinth Jacinth
Jacinth Jacinth
16:07 31 Jan 18
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julie njoku
julie njoku
12:29 24 Jan 18
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Owen Black
Owen Black
20:14 09 Jan 18
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Steven Rychalsky
Steven Rychalsky
15:30 09 Jan 18
Sadek and Cooper law office was a wonderful experience to work with. Bankruptcy is a difficult experience but they helped with the stress so much and made it easy. I would recommend Sadek and copper too anyone.
Chris Kourelias
Chris Kourelias
19:09 28 Dec 17
Working with both Brad & Matthew was a pleasure. Both gentlemen are extremely knowledgeable and helpful in providing me the right assistance needed to make the correct decision to benefit me in the long run. I would recommend both candidates to anyone looking for assistance with a reputable law firm.
Jennyfer Santana
Jennyfer Santana
21:17 21 Dec 17
Highly Recommended. Matt & Brad assisted with my case. I felt comfortable throughout the entire process. Matt was very understanding, patient, and ensured he answered all my questions! Both great guys and very friendly! It was a pleasure working with Matt and Brad.
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