Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.
In Penn, you would need to use the federal bankruptcy exemptions to protect equity in a house if you wanted to file chapter 7.
$21,625 is what can be protected, after subtracting the mortgage balance, liquidation costs from the value of the home.
It might not be enough, so you may have to consider chapter 13 repayment plan.
You would pay back enough debt to protect the equity.
Since you have some decent equity here, you might have to pay quite a bit, if not all of the credit cards back.
Therefore, a settlement offer might be wise.
Bear in mind there are tax issues here for settlements, you are taxed as if it was income for any discount given.
You would be best served to talk to a bankruptcy attorney before doing anything, most offer free consultations.
Talk to your tax advisor as well.
Let me know if you have any questions.
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