November 30, 2021

The Pros and Cons of Filing for Bankruptcy

When falling behind your finances, the pressure from creditors and debt collectors can hastily become overwhelming. Fortuitously, bankruptcy laws provide a means for overwhelmed individuals with debt to end the dreadful experience and get a fresh start. Filing for bankruptcy initiates an automatic stay, instantly stopping creditors and all debt collection activity. Furthermore, it helps with debt relief giving you the chance to have a fresh financial start.

While the idea of ending the dreadful experience may be appealing, there are pros and cons of filing for bankruptcy. Thus, many people and businesses will find themselves asking, ‘When should I file for bankruptcy?’ This article strives to discuss more on this and the pros and cons of filing bankruptcy in Media, PA.

What is bankruptcy?

Bankruptcy is a legal proceeding involving an individual or business unable to repay its outstanding debts. The bankruptcy process begins with a petition filed by the debtor or on behalf of creditors. All of the debtor’s assets are gauged and assessed by professional bankruptcy attorneys, and they may be used to repay a portion of the outstanding debt.

What should you not do before filing bankruptcy?

Bankruptcy is a life-altering experience. However, if you want a positive outcome, it is best to know what you should not do before filing bankruptcy. Most consumers try to elude bankruptcy laws by hiding or giving away assets that should be part of the filing process.

A federal bankruptcy court does not take this lightly. A bankruptcy trustee is responsible for ensuring all your financial information is reported and accounted for. While this may take some time, it is difficult to hide something and get away with it. Bankruptcy lawyers review your assets, debts, and income.

The penalties for such an act include dismissing your personal bankruptcy petition and could incorporate criminal charges punishable by serving jail time. Thus, you should avoid making these mistakes when filing for bankruptcy in a law office in Media, PA.

  • Lying about your assets.
  • Giving assets or payments to family members.
  • Taking on new debt(s).
  • Not consulting a bankruptcy lawyer or attorney.
  • Running up credit card debt.
  • Transferring property to friends or family.

How much in debt do you have to be into a file for bankruptcy?

When filing for bankruptcy, most individuals often ask themselves this question. When debt is piling up, people often feel the increasing pressure of payment plans. The amount to payback may not be that huge, but the inability to pay it back becomes more and more unlikely hence declaring bankruptcy. So, people often ask themselves if they are in enough debt to qualify for bankruptcy. How much debt should you be in to file bankruptcy?

Well, do not fret much about it. Bankruptcy laws do not need debtors to have a minimum debt amount to file a bankruptcy petition. If you want to file bankruptcy, the decision is up to you. However, you should always consult a bankruptcy attorney beforehand and seek legal advice. At our office: Siddons Law Firm, we have lawyers who specialize in bankruptcy law, and they can help you with the entire process. Therefore, if you need any legal help with a bankruptcy filing, do not hesitate to contact or hire a bankruptcy lawyer or attorney from our office.

Which type of bankruptcy should you file?

For most people, there are two main types of bankruptcies. Before filing a petition in court, you should hire an experienced bankruptcy attorney to assist you with making the right decision. A bankruptcy lawyer or attorney at our Siddons Law Office will ensure your paperwork is properly filed, represent you in court, and provide all possible exemptions are considered.

When to file for chapter 7 bankruptcy?

When your income is high enough to pay off unsecured debts and does not have several non-exempt assets, chapter 7 bankruptcy is your ideal option. Chapter 7 bankruptcy involves the liquidation of all non-exempt assets.

When to file for chapter 13 bankruptcy?

Unlike chapter 7, chapter 13 is a reorganization bankruptcy technique. It restructures your debts and defines an affordable debt repayment plan. Hence, you can pay your debts and have many assets; then, a chapter 13 bankruptcy is your best option. Besides making debt payments, you can keep all your assets. Therefore, if you are far behind on a car loan or mortgage, chapter 13 is the best option to avoid foreclosure or repossession.

Is it better to file bankruptcy or go to collections?

Filing bankruptcy and going to collections are solutions to the same issue: getting out of debt by drafting a debt repayment plan. However, they each come with merits and demerits, and selecting the appropriate one can be tricky. Contrariwise, with professional help from a bankruptcy attorney at Siddons Law Firm, Media, PA, we can help you choose the appropriate means for debt relief.

If you opt to file for bankruptcy, below are some of the benefits you will enjoy;

  • Automatic stay against creditors. After filing for bankruptcy, the federal court issues an automatic stay against creditors and any debt collection activity. While this does not cancel your debt, it suspends any debt collection proceedings until the stay is lifted or your personal bankruptcy case is completed. There will be no more home mortgage foreclosure, property repossession, lawsuits on the debt, and wage garnishments.
  • Dischargeable debts. Bankruptcy can discharge or eliminate your unsecured debt, including medical bills, car loans, credit card bills, and personal loans. In Chapter 13 bankruptcy, you get a workable amount to pay: you are discharged once your personal bankruptcy repayment plan is completed. In Chapter 7 bankruptcy, your debts can be discharged within three months. Once you have filed a bankruptcy lawsuit and received a discharge, you cannot file for debt relief again for many years.
  • Asset exemptions mean that you need not worry about them being seized in bankruptcy or the mortgage repayment plan. Bankruptcy exemptions may allow you to maintain ownership of your property. You may qualify to eliminate inferior mortgage liens from your home – your mortgage will be treated as an unsecured debt.
  • Getting a fresh financial start. Once your unsecured debts are discharged, you have a fresh start. You can apply for new loans, credit cards and rebuild your credit by proving you are responsible.
  • Stress relief. Carrying huge debts is a huge worry. Money issues can affect all forms of relationships. Once your debt is discharged, your self-esteem will improve together with your credit and relationships. You will no longer need to worry about clearing your debts or have to fight about them with a significant other.
  • Credit score. Tanked credit ranking may delay most people from filing for bankruptcy, and filing remains on your credit report for almost a decade. However, most debtors begin improving their credit scores after a bankruptcy filing.

In most cases and depending on which chapter you file under, you may enjoy the above benefits and others, such as creating a manageable repayment plan and spreading your payments over three to five years after you file a chapter 13 bankruptcy.

What are some consequences of filing for bankruptcy? 

Filing for bankruptcy protection when you should not or at the wrong time can worsen a bad financial situation. Filing too early can also mean losing a property that you would otherwise have been able to keep. Similarly, you may have to file a different type of bankruptcy that is not in your best interest. Some of the consequences of filing for bankruptcy include;

  • Loss of credit cards. Most credit card companies automatically cancel any cards you hold when filing for bankruptcy. Several offers may come your way to apply for unsecured debts or credit cards. While this can help rebuild your credit, they often require high-interest rates and annual fees.
  • Loss of property and real estate. Asset exemption may not cover property and real estate. Therefore, the federal bankruptcy court could seize some of your property and sell it to pay your debt.
  • Non-dischargeable debts. Certain types of debts are un-dischargeable by bankruptcy. They include student loans, child support and alimony, criminal restitution and fines, and any debts accumulated through fraud.
  • Instant impact on your credit score. Chapter 7 bankruptcy stays on your credit report for ten years, whereas a Chapter 13 bankruptcy stays for seven years.
  • Denial of tax funds. Local, state, and federal tax refunds can be denied to bankruptcy.
  • Challenges obtaining a mortgage loan. A bankruptcy filing can make it difficult to obtain a loan or mortgage for several years.

Contact Our Experienced Bankruptcy Attorneys at Siddons Law Firm in Media, PA today!

Most people who qualify for bankruptcy never avail themselves of its potential benefits. While filing for bankruptcy can affect your finances for several years, it is the best option for many people. However, your financial circumstances are unique to your individual situation. Deciding when, how, and if to file for bankruptcy is a complicated process.

Hire our skilled bankruptcy attorneys to determine whether filing is the best option that can benefit you. We invite you to our office: Siddons Law Firm in Media, PA, to schedule a free consultation with our skilled and experienced bankruptcy attorney or lawyer to discuss your particular financial situation and how filing for bankruptcy could impact it.