Many Pennsylvania residents find themselves in financial trouble at one time or another. Sometimes this trouble is brought on by their lack of budgeting and restraint in spending. Other times, it is brought on by circumstances, such as a job loss or illness, that is beyond their control. For some, correcting the problem is as simple as reducing spending for a couple of months; however, for others, the problem is more serious, and there does not appear to be an end in sight. In this case, Chapter 13 bankruptcy may be the answer.
Chapter 13 bankruptcy allows individuals to retain their possessions yet still find a way out of debt. Under this form of bankruptcy, the debts are restructured so that they are paid off over a set time period of either three or five years. This time period is based upon both the individual's income during the six months prior to the bankruptcy and the median income for Pennsylvania.
Debts are paid in order of priority. The first debts to be paid are taxes and child support. Once funds have been allocated for these debts, secured debts such as the home mortgage and car payment are included. Finally, if there is disposable income remaining, unsecured debts such as credit cards are included. At the end of the repayment period, dischargeable debts are generally cleared by the bankruptcy court as long as all other criteria are met.
Chapter 13 bankruptcy offers the Pennsylvania resident the opportunity to start over financially. While it is a long and drawn out process, the individual is able to retain their possessions. An experienced bankruptcy attorney can help one decide if this is the appropriate option under the given circumstances.
Source: FindLaw, "Chapter 13 Reorganization Bankruptcy", Accessed on Dec. 2, 2016