Hill, Friedland & Scarafone is a law firm located in Blue Bell, Pennsylvania. Albert J. Scarafone, Esquire is an attorney in the firm who concentrates his practice in Consumer Bankruptcy Law.
For over twenty-five (25) years, Mr. Scarafone has helped hundreds of people protect their home and property and eliminate or greatly reduce their debt.
If you have come to this page, you probably have some questions about this process and want to know how it works and if it is right for you.
Please realize that the information presented here is basic and should not be considered legal advice. Please feel free to browse this site but always base your decision after having a consultation with a qualified bankruptcy attorney.
Hill, Friedland and Scarafone was formed in 1994. The law firm is dedicated to providing the highest level of services for individuals and small businesses.
Albert J. Scarafone, Esquire
Mr. Scarafone graduated from Villanova University where he obtained a degree in Finance. Prior to attending law school, he worked as a financial analyst in the commercial lending field. Mr. Scarafone obtained his law degree from Widener University School of Law and worked for two law firms where he practiced bankruptcy law. In 1994, Mr. Scarafone formed a law firm with Harvey Friedland and Timothy Hill.
Mr. Scarafone is a member of of the Pennsylvania Bar Association and the Montgomery County Bar Association. He is also a member of the Eastern District of Pennsylvania Roundtable.
A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the Bankruptcy Code. Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. The Bankruptcy Code is a federal law that deals with bankruptcy. A person who files a chapter 7 case is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. Most of my clients do not have any non-exempt property so they keep everything that they own. In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.
It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.
A chapter 7 discharge is obtained by filing a petition with the bankruptcy court. The petition will show the court what you own, what it is worth, your monthly income and expenses and list of all of your creditors. Once the petition is filed a meeting will be scheduled before a Trustee approximately one month later to confirm that your information is correct. If the Trustee believes that you have no assets to administer, which is most cases, he or she will file a report with the court. If no objection is filed within sixty (60) days, your debt will be discharged.
Any person who is qualified to file and maintain a chapter 7 case is eligible for a chapter 7 discharge except the following:
All debts of any type or amount, including out-of-state debts, are dischargeable in a chapter 7 case except for the types of debts that are by law nondischargeable in a chapter 7 case. The following is a list of the most common types of debts that are not dischargeable in a chapter 7 case:
A person who is not eligible for a chapter 7 discharge should not file a chapter 7 case. Also, in most instances a person who has substantial debts that are not dischargeable under chapter 7 should not file a chapter 7 case. In addition, it is not usually advisable for a person with disposable income sufficient to make the required minimum payments to unsecured creditors to file a chapter 7 case, because a presumption of abuse will arise and the case will probably be dismissed or converted to chapter 13.
Yes. A person is not permitted to file a chapter 7 case unless he or she has, during the 180-day period prior to filing, received from an approved nonprofit budget and credit counseling agency an individual or group briefing that outlined the opportunities for available credit counseling and assisted the person in performing a budget analysis. This briefing may be conducted by telephone or on the internet, if desired, and must be paid for by the person. When the chapter 7 case is filed, a certificate from the agency describing the services provided to the person must be filed with the court. A copy of any debt repayment plan prepared for the person by the agency must also be filed with the court. In emergency situations, the required credit counseling may be conducted after the case is filed.
The filing fee is $335 for either a single or a joint case. The filing fee is payable when the case is filed. However, if the person filing can show that his or her income is less than 150 percent of the official poverty line and that he or she is unable to pay the filing fee, the court can waive payment of the filing fee. If the person filing is unable to pay the entire filing fee when the case is filed, it may be paid in up to four installments, with the final installment due within 120 days. The period for payment may later be extended to 180 days by the court, if there is a valid reason for doing so. Unless payment is waived by the court, the entire filing fee must ultimately be paid or the case will be dismissed and no debts will be discharged.
A chapter 7 case is filed in the office of the clerk of the bankruptcy court in the district where the debtor has resided or maintained a principal place of business for the greater portion of the last 180 days. The bankruptcy court is a federal court and is a unit of the United States district court.
Yes. A husband and wife may file a joint case under chapter 7. If a joint chapter 7 case is filed, only one set of bankruptcy forms is needed and only one filing fee is charged. However, both husband and wife must receive the required credit counseling before the case is filed and both must complete the required financial management course after the case is filed.
Yes. A husband and wife should file a joint chapter 7 case if both of them are liable for one or more significant dischargeable debts. If both spouses are liable for a substantial debt and only one spouse files under chapter 7, the creditor may later attempt to collect the debt from the nonfiling spouse, even if he or she has no income or assets.
The answer depends on the status of the person’s dischargeable debts, the nature and status of the person’s nonexempt assets, and the actions taken or threatened to be taken by creditors. The following rules should be followed:
If an aggressive creditor has threatened to attach or garnishee a person’s assets or income, the case should be filed immediately to take advantage of the automatic stay that accompanies the filing of a chapter 7 case. If a creditor has threatened to attach or garnishee the person’s wages or if a foreclosure action has been filed against his or her home, it may be necessary to file the case immediately in order to protect the person’s interest in the property.
The filing of a chapter 7 case by a person automatically suspends virtually all collection and other legal proceedings pending against that person. A few days after a chapter 7 case is filed, the court will mail a notice to all creditors ordering them to refrain from any further action against the person. This court-ordered suspension of creditor activity against the person filing is called the automatic stay. If necessary, notice of the automatic stay may be served on a creditor earlier by the person or the person’s attorney. Any creditor who intentionally violates the automatic stay may be held in contempt of court and may be liable in damages to the person filing. Criminal proceedings and actions to collect domestic support obligations from exempt property or property acquired by the person after the chapter 7 case was filed are not affected by the automatic stay. The automatic stay also does not protect cosigners and guarantors of the person filing, and a creditor may continue to collect debts from those persons after the case is filed. Persons who have had a prior bankruptcy case dismissed within the past year may be denied the protection of the automatic stay.
It will usually worsen it, if that is possible. However, some financial institutions openly solicit business from persons who have recently filed under chapter 7, apparently because it will be at least 8 years before they can file another chapter 7 case. If there are compelling reasons for filing a chapter 7 case that are not within the person’s control (such as an illness or an injury), some credit rating agencies may take that into account in rating the person’s credit after filing.
When a chapter 7 case is filed, it becomes a public record and the names of the persons filing may be published by some credit-reporting agencies. However, newspapers do not usually report or publish the names of consumers who file chapter 7 cases.
Employers are not usually notified when a chapter 7 case is filed.
No. Filing a chapter 7 case is not a criminal proceeding, and a person does not lose any civil or constitutional rights by filing.
No. It is illegal for either private or governmental employers to discriminate against a person as to employment because that person has filed a chapter 7 case. It is also illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses (including a driver's license), permits, student loans, and similar grants because that person has filed a chapter 7 case.
Usually not. Certain property is exempt and may not be taken by creditors unless it is encumbered by a valid mortgage or lien. A person is usually allowed to retain his or her unencumbered exempt property in a chapter 7 case. A person may also be allowed to retain certain encumbered exempt property). Encumbered property is property against which a creditor has a valid lien, mortgage or other security interest.
Exempt property is property that is protected by law from the claims of creditors. However, if exempt property has been pledged to secure a debt or is otherwise encumbered by a valid lien or mortgage, the lien or mortgage holder may claim the exempt property by foreclosing upon or otherwise enforcing the creditor’s lien or mortgage. In bankruptcy cases property may be exempt under either state or federal law. Exempt property typically includes all or a portion of a person’s unpaid wages, home equity, household furniture, and personal effects. Your attorney can inform you as to the property that is exempt in your case.
Rarely. There is a meeting at an office called the "meeting of creditors," which is usually held about a month after the case is filed. You will be represented by me. The person filing the case must bring photo identification, his or her social security card, his or her most recent pay stub and all of his or her bank and investment account statements to this hearing. At this meeting the person is put under oath and questioned about his or her debts, assets, income and expenses by the hearing officer or trustee. In most chapter 7 consumer cases no creditors appear; but any creditor that does appear is usually allowed to question the person. For most persons this will be their only appearance, but if the bankruptcy court decides not to grant the person a discharge or if the person wishes to reaffirm a debt, there may be a hearing about three months later in bankruptcy court which the person will have to attend. This usually does not happen in a typical case.
After the meeting of creditors, the trustee may contact the person filing regarding his or her property and the court may issue certain orders to the person. These orders are sent by mail and may require the person to turn certain property over to the trustee, or provide the trustee with certain information. If the person fails to comply with these orders, the case may be dismissed, in which case his or her debts will not be discharged. The person must also attend and complete an instructional course on personal financial management and file a statement with the court showing completion of the course.
The trustee is a person appointed by the United States trustee to examine the person who filed the case, collect the person’s nonexempt property, and pay the expenses of the estate and the claims of creditors. In addition, the trustee has certain administrative duties in a chapter 7 case and is responsible for seeing to it that the person filing performs the required duties in the case. A trustee is appointed in a chapter 7 case, even if the person filing has no nonexempt property.
The law requires the person filing to cooperate with the trustee in the administration of a chapter 7 case, including the collection by the trustee of the person’s nonexempt property. If the person does not cooperate with the trustee, the chapter 7 case may be dismissed and the person’s debts will not be discharged. At least 7 days before the meeting of creditors the person filing must give the trustee and any requesting creditors copies of his or her most recent Federal income tax returns.
Of course. You can call me at 610-275-4000 or email at firstname.lastname@example.org. I will be able to answer your general questions or I will be glad to schedule a no-cost consultation.
A chapter 13 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 13 of the Bankruptcy Code. Chapter 13 is the chapter of the Bankruptcy Code, which allows a person to repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. The Bankruptcy Code is the federal law that deals with bankruptcy. A person who files a chapter 13 case is called a debtor. In a chapter 13 case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective. If the court approves the debtor's plan, most creditors will be prohibited from collecting their claims from the debtor. The debtor must make regular payments to a person called the chapter 13 trustee, who collects the money paid by the debtor and disburses it to creditors in the manner called for in the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the remainder of his or her dischargeable debts.
The basic difference between a chapter 7 case and a chapter 13 case is that in a chapter 7 case the debtor's nonexempt property (if any exists) is liquidated to pay as much as possible of the debtor's debts, while in chapter 13 cases a portion of the debtor's future income is used to pay as much of the debtor's debts as is feasible under the debtor's circumstances. As a practical matter, in a chapter 7 case the debtor loses all or most of his or her nonexempt property and receives a chapter 7 discharge, which releases the debtor from liability for most debts. In a chapter 13 case, the debtor usually retains his or her nonexempt property, but must pay off as much of his or her debts as the court deems feasible and receives a chapter 13 discharge, which is slightly broader than a chapter 7 discharge and releases the debtor from liability for a few types of debts that are not dischargeable under chapter 7. However, a chapter 13 case normally lasts much longer than a chapter 7 case and is usually more expensive for the debtor.
Chapter 13 is usually preferable for a person who - (1) wishes to repay all or most of his or her unsecured debts and has the income with which to do so within a reasonable time, (2) has valuable nonexempt property or has valuable exempt property securing debts, either of which would be lost in a chapter 7 case, (3) is not eligible under means testing to maintain a chapter 7 case, (4) is not eligible for a chapter 7 discharge, (5) has one or more substantial debts that are dischargeable under chapter 13 but not under chapter 7, or (6) has sufficient assets with which to repay most of his or her debts, but needs temporary relief from creditors in order to do so.
In a chapter 13 case, the bankruptcy court can provide relief to the debtor that a private debt consolidation service cannot provide. For example, the court has the authority to prohibit creditors from attaching or foreclosing on the debtor's property, to force unsecured creditors to accept a chapter 13 plan that pays only a portion of their claims, and to discharge a debtor from unpaid portions of debts. Private debt consolidation services have none of these powers.
It is a court order releasing a debtor from all of his or her dischargeable debts and ordering creditors not to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay. There are two types of chapter 13 discharges: (1) a full or successful plan discharge, which is granted to a debtor who completes all payments called for in the plan, and (2) a partial or unsuccessful plan discharge, which is granted to a debtor who is unable to complete the payments called for in the plan due to circumstances for which the debtor should not be held accountable. A full chapter 13 discharge discharges a few more debts than a chapter 7 discharge, while a partial chapter 13 discharge is similar to a chapter 7 discharge.
A full chapter 13 discharge granted upon the completion of all payments required in the plan discharges a debtor from all debts except:
A partial chapter 13 discharge, which is granted when a debtor is unable to complete the payments under a plan due to circumstances for which he or she should not be held accountable, discharges the debtor from all debts except:
It is a written plan presented to the bankruptcy court by a debtor that states how much money or property the debtor will pay to the chapter 13 trustee, how long the debtor's payments to the chapter 13 trustee will continue, how much will be paid to each of the debtor's creditors, and certain other matters.
A chapter 13 trustee is a person appointed by the United States trustee to collect payments from the debtor, make payments to creditors in the manner set forth in the debtor's plan, and administer the debtor's chapter 13 case until it is closed. In some cases the chapter 13 trustee is required to perform certain other duties. The debtor is required to cooperate with the chapter 13 trustee.
Any debts whatsoever, whether they are secured or unsecured. Even debts that are nondischargeable, such as debts for student loans or child support, may be paid under a chapter 13 plan.
No. While priority debts, such as debts for domestic support obligations and taxes, and fully secured debts must be paid in full under a chapter 13 plan, only an amount that the debtor can reasonably afford must be paid on most debts. The unpaid balances of most debts that are not paid in full under a chapter 13 plan are discharged upon the completion or termination of the plan.
No. If there is a reasonable basis for doing so, unsecured debts (or claims) may be divided into separate classes and treated differently. It may be possible, therefore, to pay certain unsecured debts in full, while paying significantly less on others.
No, not in a practical sense. They are different terms for an obligation owed by the debtor to a creditor. A claim is the right of a creditor to the payment of an obligation by the debtor. A debt is a liability of a debtor on an obligation to a creditor. For example, if the debtor owes $1,000 to the bank, the $1,000 obligation is viewed as a debt by the debtor and as a claim by the bank.
Usually all of the disposable income of the debtor and the debtor's spouse for a 3 or 5 year period must be paid to the chapter 13 trustee. Disposable income is income received by the debtor and his or her spouse that is not deemed to be necessary for the support of the debtor and his or her dependents.
The debtor must begin making payments to the chapter 13 trustee within 30 days after the chapter 13 case is filed with the court. The payments must be made regularly, usually on a weekly, bi-weekly, or monthly basis. If the debtor is employed, some courts require that the payments to be made directly to the chapter 13 trustee by the debtor's employer.
The required length of a chapter 13 plan depends on the debtor’s income. If the debtor’s annual income is less than the median family income for the debtor’s state and family size, the length of the plan must be 3 years, unless the debtor can justify a longer period, which may not exceed 5 years. If the debtor’s annual income exceeds the median family income, the length of the plan must be 5 years unless all unsecured claims can be paid off in a shorter period. The debtor’s annual income is his or her current monthly income multiplied by 12.
No. To become effective, a chapter 13 plan must be approved by the court, not by the creditors. The court, however, cannot approve a plan unless each secured creditor is dealt with in the manner described in the answer to Question 18 below. Also, unsecured creditors are permitted to file objections to the debtor's plan, and these objections must be ruled on by the court before it can approve the debtor's chapter 13 plan.
A secured creditor is a creditor whose claim against the debtor is secured by a valid mortgage, lien, or other security interest against property that is owned by the debtor. An unsecured creditor is a creditor whose claim against the debtor is not secured by a valid mortgage, lien or security interest against the debtor’s property. In other words, a secured creditor has collateral for its claim and an unsecured creditor does not. The basic difference is that a secured creditor may collect all or a portion of its claim from its collateral, while an unsecured creditor may not. It is common for the amount of a secured creditor’s claim to exceed the value of its collateral. This type of creditor is called a partially-secured (or undersecured) creditor. In chapter 13 cases the claims of most partially-secured creditors are divided into secured and unsecured portions. For example, a partially-secured creditor with a $2,000 claim against the debtor that is secured by collateral that is worth $1,500 has a $1,500 secured claim and a $500 unsecured claim. The only types of partially-secured creditors whose claim may not be treated in this manner are creditors secured by a mortgage on the debtor’s home and certain creditors who advanced funds for the purchase of automobile or other personal property of the debtor. It is important to differentiate between secured and unsecured claims because they are treated quite differently in chapter 13 cases. Secured claims must be paid in full with interest, while only amounts that the debtor can reasonably afford need be paid to the holders of unsecured claims except priority claims.
There are four methods of dealing with secured claims in chapter 13 cases: (1) the creditor may accept the debtor's plan, (2) the creditor may retain its lien and be paid the full amount of its secured claim in equal monthly payments under the plan, (3) the debtor may surrender the collateral to the creditor, or (4) the creditor may be paid or dealt with outside the plan. It is important to understand that most partially-secured creditors have a secured claim only to the extent of the value of their collateral. If the debtor is in default to a secured creditor, the default must be cured (made current) within a reasonable time.
A cosigned or guaranteed debt is a debt of the debtor that has been cosigned or guaranteed by another person. If a cosigned or guaranteed consumer debt is being paid in full under a chapter 13 plan, the creditor may not collect the debt from the cosigner or guarantor. However, if a consumer debt is not being paid in full under the plan, the creditor may collect the unpaid portion of the debt from the cosigner or guarantor. A consumer debt is a nonbusiness debt. Creditors may collect business debts from cosigners or guarantors even if the debts are to be paid in full under the debtor's plan.
Any individual (i.e., natural person) is eligible to file a chapter 13 case if he or she - (1) resides in, does business in, or owns property in the United States, (2) has regular income, (3) has unsecured debts of less than $381,175, (4) has secured debts of less than $1,149,525, (5) is not a stockbroker or a commodity broker, (6) has not intentionally dismissed another bankruptcy case within the last 180 days, and (7) has received a briefing from an approved credit counseling agency within the last 180 days (unless this requirement is not in effect in the local bankruptcy court). Corporations, partnerships, limited liability companies, and other business entities are not eligible to file a chapter 13 case.
A husband and wife may file a joint chapter 13 case if each of them meets the individual requirements to file, except that only one of them need have regular income and their combined debts must meet the debt limitations described above.
If both spouses are liable for any significant debts, they should file a joint chapter 13 case, even if only one of them has income. Also, if both of them have regular income, they should file a joint case.
Yes. A self-employed person meeting the eligibility requirements listed above may file a chapter 13 case. A debtor engaged in business may continue to operate the business during his or her chapter 13 case.
Yes. An existing chapter 7 case may be converted to a chapter 13 case at any time at the request of the debtor if the case has not previously been converted from chapter 13 to chapter 7.
A chapter 13 case is filed in the office of the clerk of the bankruptcy court in the district where the debtor has lived or maintained a principal place of business for the greatest portion of the last 180 days. The bankruptcy court is a federal court and is a unit of the United States district court.
There is a $310 filing fee charged when the case is filed, which may be paid in installments if necessary. In addition, the chapter 13 trustee assesses a fee of approximately 10 percent on all payments made by the debtor under the plan. Thus, if a debtor pays a total of $5,000 under a chapter 13 plan, the total amount of fees charged in the case will be $689 (a $500 trustee's fee, plus the $310 filing fee). These fees are in addition to the fee charged by the debtor's attorney.
Usually not. In a chapter 13 case, creditors are usually paid out of the debtor's income and not from the debtor's property. However, if a debtor has valuable nonexempt property and has insufficient income to pay enough to creditors to satisfy the court, some of the debtor's property may have to be used to pay creditors.
The filing of a chapter 13 case automatically stays (stops) all lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against the debtor or the debtor's property. This stay is called the automatic stay. A few days after the case is filed, the court will mail a notice to all creditors advising them of the automatic stay. Certain creditors may be notified sooner, if necessary. Most creditors are prohibited from proceeding against the debtor during the entire course of the chapter 13 case. If the debtor is later granted a chapter 13 discharge, the creditors will then be prohibited from collecting the discharged debts from the debtor after the case is closed. If the debtor has had a prior bankruptcy case dismissed within the past year, he or she may be denied the protection of the automatic stay.
Yes. A financial counselor has no legal authority to prevent a person from filing any type of bankruptcy case, including a chapter 13 case.
It may worsen it, at least temporarily. However, if most of a person's debts are ultimately paid off under a chapter 13 plan, that fact may be taken into account by credit reporting agencies. If very little is paid on most debts, the effect of a chapter 13 case on a person’s credit rating may be similar to that of a chapter 7 case.
When a chapter 13 case is filed, it becomes a public record and the name of the debtor may be published by some credit reporting agencies. However, newspapers do not usually publish the names of persons who file chapter 13 cases.
In most cases, no. Unless your attorney requires a wage order that require a your employer to make payments to the chapter 13 trustee on your behalf, your employer will not be notified.
No. A chapter 13 case is a civil proceeding and not a criminal proceeding. Therefore, a person does not lose any legal or constitutional rights by filing a chapter 13 case.
No. It is illegal for either private or governmental employers to discriminate against a person as to employment because that person has filed a chapter 13 case. It is also illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses, permits, student loans, and similar grants because that person has filed a chapter 13 case.
The court will approve and confirm a chapter 13 plan if it finds that: (1) all required fees, charges and deposits have been paid, (2) all priority claims will be paid in full under the plan, (3) if the plan creates different classes of claims, it provides the same treatment for each claim within a particular class, (4) the plan was proposed in good faith, (5) each unsecured creditor will receive under the plan at least as much as it would have received had the debtor filed a chapter 7 case, (6) the debtor will be able to make the required payments and comply with the plan, and (7) each secured creditor is dealt with in one of the four methods described in the answer above.
Of course. You can call me at 610-275-4000 or email at email@example.com. I will be able to answer your general questions or I will be glad to schedule a no-cost consulation.
This page has links to more information that you may find useful.