Timing Counts: When to Consult a Philadelphia Bankruptcy Attorney
If you are struggling with financial difficulties and thinking of bankruptcy as a safety net, you would be well advised to consult with a Philadelphia bankruptcy attorney sooner rather than later. Individuals (including married couples) are required to meet certain criteria in order to qualify for relief under either Chapter 7 or Chapter 13 of the Bankruptcy Code, and determining eligibility can be a complicated task that requires the expert advice of an experienced Philadelphia bankruptcy attorney.
In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) to reduce consumer bankruptcy filings, to address the concerns of creditors, and to curb abuse in the form of serial and/or opportunistic filings (for example, those individuals who deliberately incurred substantial credit card debt then declared bankruptcy in order to have those debts discharged – and then did it again). BAPCPA imposed new tests on prospective bankruptcy debtors as well as more stringent eligibility requirements.
With respect to eligibility for Chapter 7 (liquidation) bankruptcy in particular, if the debtor’s “current monthly income” is more than the state median, a “means test” is used to determine whether the Chapter 7 filing is abusive. In general, abuse will be presumed if the debtor’s income is over the means test threshold, or if the debtor can pay back 25% of his or her “nonpriority unsecured debt.” The debtor can rebut a presumption of abuse by showing special circumstances. If not, the case will generally be converted to Chapter 13 (if the debtor agrees) or will be dismissed. Chapter 13 (reorganization) bankruptcy relief is available to individuals with regular income if the debtor’s unsecured debts are less than $394,725 and secured debts are less than $1,184,200. These amounts are adjusted from time to time to reflect changes in the consumer price index. These eligibility determinations are complicated and time-consuming, and require detailed analysis of the prospective bankruptcy debtor’s income, expenses, assets, debts and any special circumstances involved.
Other factors also favor consulting with a Philadelphia bankruptcy attorney as soon as any serious financial problems arise. For example, many people drain their retirement accounts (such as 401(k)s and IRAs) trying to keep up with payments to creditors; but in most cases they could save 100% of those accounts and also eliminate or reorganize their debts by consulting a bankruptcy expert before exhausting their retirement funds. Another example of why timing counts is that any seasonal or unusual increase in an individual’s regular income (e.g., a bonus) will be included when calculating a debtor’s income for the means test if it is paid within six months preceding the bankruptcy. That will inflate the means test results. Timing is critical, and is often under the control of the client, not the creditors.
Obviously, expert assessments are necessary to understand what options are available and how to maximize the benefits provided under the Bankruptcy Code. The earlier an individual seeks advice from a Philadelphia bankruptcy attorney, the better prepared s/he will be if filing for bankruptcy is ultimately required.
Speak to A Bankruptcy Lawyer at Alfred Abel Law Offices
If you are debating whether now is the right time to file bankruptcy, talk to a bankruptcy lawyer at Alfred Abel Law Offices to learn more. The attorneys at Alfred Abel have extensive experience with bankruptcy proceedings and will provide skilled guidance. Consulting a bankruptcy lawyer before taking any legal action can help individuals receive more favorable results. Contact our law offices today for more information.