Answers to Frequent Questions

Generally, wage attachment in Pennsylvania is limited to child support, federal student loans, delinquent taxes, or other government obligations such as SBA loans, and landlord judgments. It is not available to general unsecured creditors such as credit cards, personal loans, or other general bills.

Anyone having difficulty with debt has 3 options:

negotiate, defend any such suit, or consider a bankruptcy. If you have been sued, you should contact a debt relief attorney as

soon as possible as there are deadlines and counsel will discuss all three options. You can then choose the one which is right for you based on your assets, income, amount of the claim, and likelihood of success.

When most consumers think of bankruptcy, they are thinking of Chapter 7, as opposed to Chapter 11, generally a business reorganization. While Chapter 7 is subtitled “liquidation”, most consumer cases are determined to be “no asset”. That doesn’t mean the debtor has no assets, but that any such assets are exempt under state or bankruptcy law such that no assets are liquidated, especially the home. If any such

assets would be exposed in a bankruptcy, that option would be discouraged.

No, bankruptcy by itself will not destroy your credit. Rather, credit reports were created by entrepreneurs to gather financial information on consumers and sell that information to subscribers. Credit reports simply reflect credit history and it is non payment that harms credit, not filing bankruptcy when the debtor is already delinquent. More importantly, mortgage

lenders will generally be able to lend to a debtor whose bankruptcy was finalized at least 2 years before applying for a

mortgage, subject to amounts sought and income.

From filing to discharge, which is the court determination that debts are eliminated, is about 4 months.

However, most of the work occurs prior to filing in the completion of the Petition and after filing by attending usually one meeting of creditors.

The first option is to defend the case so that you avoid a judgment in foreclosure which usually results in a sheriff sale. While the case is pending, the homeowner can pursue a loan modification, refinance, or sale of the home.

If you have lost your foreclosure case, either after defending it or by default, the mortgage company may, and likely will, schedule a sheriff sale. At any time before that sale, the homeowner can file a Chapter 13 bankruptcy, which may provide an opportunity to repay the arrears through a plan over a period of up to 5 years. Payments must be made monthly to a Chapter 13 Trustee, and the regular monthly mortgage payments must also resume. Chapter 13 requires the mortgage company to accept those post-filing payments as long as the homeowner remains in the case and the company has not received permission from the court to proceed with the sale.

A loan modification is a unilateral offer by the mortgage company to change the loan terms with the goal of ending the foreclosure case and allowing the homeowner to resume payments. Arrears, meaning the delinquent amount, along with costs, interest, attorney’s fees, and reimbursable amounts advanced by the mortgage company, may be forgiven or deferred until the end of the modification period. Deferment is a typical component and, usually, either through a reduction in the interest rate or an extension of the original term, payments are reduced.

Start with the proposition that all debts are dischargeable unless they are excepted from discharge under Section 523 of the Bankruptcy Code. Typical exceptions include income taxes due within 3 years before filing, or taxes for which returns have not been filed, student loans, alimony and child support, and criminal fines and penalties.

When a debtor falls behind in debt, negotiation is usually difficult or impossible to do. Debt settlement companies typically prepare a budget and determine disposable income, which they then seek to have automatically debited from your account while they negotiate. Since negotiation is fraught with uncertainty, it is not recommended unless the creditor is able to affect assets. There is a 4 year statute of limitations on contracts in Pennsylvania. That means that creditors have 4 years to sue for nonpayment, which begins to run from the date of the last payment. Until or unless you have been sued, the creditor cannot affect any of your assets, so it is better to save funds for basic living expenses and as a possible source to settle if or when the time is right.