Chapter 7 Bankruptcy Attorneys
in Allentown, Pennsylvania

If you’re struggling with debt, bankruptcy might seem like the only way out. But before you file, it’s important to understand the different types of bankruptcy and what each option can and cannot do. Chapter 7 bankruptcy is a popular choice for many people looking for a fresh financial start. 

Are you considering filing for bankruptcy under Chapter 7? Reach out to our Chapter 7 bankruptcy attorneys in Allentown, Pennsylvania, to discuss your specific case and determine whether filing under this chapter is a good option for you. Our bankruptcy attorneys at Rapa Law Office, P.C. provide legal counsel to debtors who need a fresh start. With an office in Allentown, we also represent individuals in Walnutport, Slatington, Lehighton, Jim Thorpe, Palmerton, Bethlehem, and Northampton.  

Chapter 7 Bankruptcy  

Chapter 7 bankruptcy is a legal process that allows individuals to wipe out their debts and start over with a clean slate. In this type of bankruptcy – which is often referred to as “liquidation” bankruptcy – the debtor’s non-exempt assets are liquidated and the proceeds are used to pay off creditors.  

Most types of unsecured debts (e.g., credit card debt and medical bills) are discharged in Chapter 7 bankruptcy, meaning you no longer have the responsibility to pay them back. However, one of the requirements when filing for Chapter 7 bankruptcy is that your annual income cannot exceed the household income levels for Pennsylvania. This is known as the means test. For example, a family of three in Pennsylvania cannot earn more than $74,369 to be eligible to file for Chapter 7 bankruptcy in 2023.  

What Chapter 7 Bankruptcy Can and Cannot Do 

Before filing for Chapter 7 bankruptcy, you need to understand what this type of debt relief can and cannot do for you to ensure that you are not chasing false hopes.  

What Chapter 7 Bankruptcy Can Do 

Chapter 7 bankruptcy can provide immediate relief from creditor harassment, collection calls, and wage garnishments. It can also put a stop to foreclosure proceedings and give you some breathing room to catch up on missed mortgage payments. In addition, Chapter 7 bankruptcy can allow you to keep certain assets, such as your primary residence, personal property, and retirement accounts, if they are exempt under state or federal law. 

What Chapter 7 Bankruptcy Cannot Do 

While Chapter 7 bankruptcy can provide significant debt relief, it’s important to understand its limitations. Chapter 7 bankruptcy cannot discharge certain types of debts, such as student loans, tax debts, and child support payments. It also cannot prevent the repossession of secured assets, such as a car or a home, if you are behind on payments. Finally, Chapter 7 bankruptcy remains on your credit report for up to 10 years and can negatively impact your credit score. 

Qualifying for Chapter 7 Bankruptcy 

As mentioned earlier, to qualify for Chapter 7 bankruptcy, you must pass the “means test,” which looks at your income and compares it to the median income in your state. If your household income is below the median, you qualify for Chapter 7 bankruptcy. If your income is above the median, you may still be able to qualify by demonstrating that you do not have sufficient disposable income to pay back the debts. 

Another requirement to qualify for Chapter 7 bankruptcy is that at least seven years must pass after your prior Chapter 7 bankruptcy filing. If you previously filed for bankruptcy under Chapter 13, the waiting time is up to six years. The six-year waiting period may be waived when filing for Chapter 7 bankruptcy with a prior Chapter 13 bankruptcy filing if the debtor met all the requirements in the Chapter 13 filing.  

When Is Chapter 7 a Good Debt Relief Option?  

While Chapter 7 bankruptcy can be a great option for individuals struggling with unmanageable debt, it may not the right choice for everyone. Let’s discuss the various situations in which Chapter 7 may be a good debt relief option: 

1. You have significant dischargeable debt. 

Chapter 7 bankruptcy is designed to help individuals who are struggling with unsecured debt that they are unable to pay off. Unsecured debt includes credit card debt, medical bills, and personal loans. If you have significant amounts of these types of debts and are unable to keep up with payments, Chapter 7 may be a good option for you. 

2. You do not own expensive property.  

Chapter 7 bankruptcy involves the liquidation of assets to repay creditors. This means that if you own expensive property, such as a valuable car or a second home, you may not be eligible for Chapter 7. However, if your assets are primarily exempt, then Chapter 7 might still be a viable option. 

3. Your credit score is low.  

If you are struggling to keep up with payments on your unsecured debts, it’s likely that your credit score has already taken a hit. However, filing for Chapter 7 bankruptcy can actually improve your credit score in the long run. Once your debts are discharged, you can begin to rebuild your credit by making on-time payments on your remaining debts. 

4. You are worried about wage garnishment.  

You may be at risk of wage garnishment if you are unable to keep up with payments on your unsecured debt. Filing for Chapter 7 bankruptcy can put a stop to wage garnishment and prevent creditors from taking other legal actions against you to collect owed debts. 

5. You are unable to keep up with monthly payments.  

If you are struggling to meet basic living expenses because you are paying off unsecured debts, filing for Chapter 7 bankruptcy may be a necessary step to relieve some of that financial stress. Through Chapter 7, a debtor can have their eligible debts discharged while maintaining household possessions and vulnerable property. 

6. You are worried about liens or lawsuits because of your debt. 

If you owe a significant amount of unsecured debt, such as credit card debt, and have not paid it back, the creditors may seek legal action against you in the form of liens or lawsuits. If these are concerns of yours, Chapter 7 bankruptcy can stop the creditor’s pursuit of any legal action against the debtor.