Most people often go into debt to pay for student loans, buy their first house or car, start a business, child support, taxes, debts incurred through fraud or other bad acts, and so on. You could say debt is a part of life and the easiest way to achieve financial goals that would otherwise be unattainable with savings alone.
However, it may come a time when your debts are just too overwhelming. Maybe your business has not been doing well, and you can no longer pay all your bills, and eventually, they become your money problems. Or a financial emergency, like medical debt, has set you back significantly. So, you find yourself several months late on your mortgage and are at risk of foreclosure. On top of that, you probably have unpaid bills, and debt collectors are on your back.
Bankruptcy is a legal process that describes a person or entity that can no longer repay its creditors. The right to file for bankruptcy is provided for by federal law, and all bankruptcy cases are handled in federal court. Bankruptcy is usually filed by the debtor and granted by a court order. In this case, you can choose to file for your bankruptcy petition.
When Should You File Bankruptcy in Media, PA?
It is not always necessary that most people file bankruptcy when they have financial debt. Ideally, you should file only if:
- Your liabilities far outweigh your assets and household income: in this case, you are not generating enough income to service your loans.
- You have tried to reach a consensus with your creditors: you should always negotiate a repayment plan.
How does Chapter 13 work in Media, Pennsylvania?
Chapter 13 Bankruptcy is a legal arrangement and process that allows you to pay back defaulted debts over anywhere between 36 to 60 months. In Pennsylvania, Chapter 13 Bankruptcy is usually filed by debtors to save their homes from foreclosure or vehicles from repossession.
How Much Does It Cost to File for Bankruptcy?
It will cost you $335 to file Chapter 7 bankruptcy and $310 for Chapter 13 Bankruptcy. However, bankruptcy law requires you first to get credit counseling. For that, a $50 fee should be paid. You may also incur additional payment if you decide to hire bankruptcy lawyers to handle the process for you.
What Happens When You File for Bankruptcy? The Negative Side of Bankruptcy
When you and your Pennsylvania bankruptcy lawyer file for bankruptcy will save you from repaying some or all of your debts, including your credit card debt, it also comes with some negative consequences. For one, you may still lose your valuable property and assets.
The court usually chooses a trustee who oversees the selling of your non-exempt property to repay part of your personal loans in most cases. So, you may lose assets like your vacation home, a second vehicle, boats, or any other valuable possessions you may possess.
However, the worst effect of bankruptcy is the long-term effect on your credit. Generally, the bankruptcy will appear in your credit report and stay for up to 7 (Chapter 13 Bankruptcy) or 10 years (Chapter 7 Bankruptcy). And as long as it is listed in your report, you will have a very hard time getting loans from banks or any other secured creditors. And it is not just loans, but credit cards too.
That said, even if you do get a personal loan or credit card, it will come with very high-interest rates and insurance premiums. Your credit score is sure to take a hit, no matter the type of bankruptcy you file for. If your credit score was in a healthy range, it could be hit a lot harder than that of a person who has a poor score.
Do You Lose Your House in Bankruptcy?
The good news is that bankruptcy can protect you from losing your valuable property. Chapter 13 bankruptcy is designed to allow you to keep your home and other assets, even if you are lagging on your payments. Under a Chapter 13 bankruptcy plan, you can catch up on missed or late mortgage payments. You may also get the time to negotiate a loan modification. Getting a fresh financial start. Once your unsecured debt (such as credit cards or medical bills) is discharged, you have that fresh start.
With Chapter 7 bankruptcy, the court usually chooses a trustee who oversees the selling of your property to repay that is part of your personal loans. So, you may lose assets like your vacation home, a second vehicle, boats, or any other valuable possessions you may possess. But you still keep your primary home and car as long as you commit to making repayments.
What Can Bankruptcy Affect While on Your Credit Report?
Once bankruptcy appears on your credit score, it can affect some or all of the following:
- Securing a car loan payment
- Purchasing or leasing a home apartment
- Your interest rates on financing (they will go up)
- Your ability to get a loan without a co-signer
- Your credit limits on unsecured credit cards (they will go down)
- The liable penalties for late payments
- Your student loans payment schedules
- Your credit utilization restrictions
- Your ability to add users to your credit cards
Getting Back to a Good Credit Score After Bankruptcy
While it may sound all gloom and doom, the good news is that your credit can recover after a bad run forces you into bankruptcy. And, there are steps you can take to improve your credit score after bankruptcy:
Get a Co-Signer
You can still get a loan with a poor credit score to demonstrate credit behavior. However, you will probably need a co-signer. A co-signer is a person who agrees to pay back your loan if you fail to do so.
Try Credit Builder Loans
Traditional loans are harder to qualify for once you start filing for bankruptcy. But you can still build your credit by taking credit builder loans. With this type of loan, the lender will hold a specific amount of money in a savings account or certificate of deposit in your name. You then make monthly payments until the loan is fully settled.
Apply for a Secured Credit Card and Use it Strategically
While you want to reduce your reliance on credit cards after bankruptcy, strategically using a credit card can help rebuild your credit history. You will likely have a hard time getting an unsecured card. Instead, take out a secured credit card, which will require you to make a security deposit and borrow against it.
Become an Authorized User on Another Person’s Card
If someone close to you has great credit, you can request them to add you as an authorized user to help you build your credit. As an authorized user, you enjoy all the benefits without the responsibility of paying all your credit card debts at the end of the month. However, late repayments will affect your score, too, so be careful with who you choose.
Make All Your Other Repayments on Time
There are those debts that will not appear in your credit report. You want to make sure you keep up with these payments as they can still affect your credit score.
How Do I Claim Bankruptcy In Pennsylvania?
To start filing your bankruptcy petition, you will first need to collect bankruptcy forms together with your bankruptcy lawyer. Next, you will need to go for credit counseling before filling out the forms. Once you have filled the forms, pay the filing fees, print and take them to court.
Need Help Filing for Bankruptcy in Media, PA? Do It Right with Our Bankruptcy Attorney
Filing for bankruptcy is sometimes necessary to prevent unsecured creditors from coming for everything you have and to put you in a better position. Even though it will affect your credit score, you can always work to rebuild it. Remember, rebuilding your credit is a slow and careful process. So, do not rush it, as you may end up undoing your efforts. Borrow what you can afford to pay off comfortably.
So, are you thinking of filing for bankruptcy? Or in need of legal advice, and legal help with the process? Siddons Law Firm has the best Pennsylvania bankruptcy attorney. Our law firm can help you solve your financial issues while keeping your legal fees as low as possible. For further consultation and to learn more about bankruptcy laws, why not give us a call on 610-255-7500. Contact our law firm to talk with our bankruptcy attorney in Media, PA today!