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What to Know before Filing Bankruptcy in Pennsylvania

Bankruptcy is a legal process that allows companies and individuals to eliminate their debts and initiate a new financial beginning. It is a legal process in which an individual or a company declares their inability to pay their debts. Cases related to bankruptcy fall under federal law and must be filed with the U.S. Bankruptcy Court. 

Reasons why people go bankrupt 

Before we talk about this complex process, let us understand some of the common concerns that people have about bankruptcy. The following are some common reasons which may force an individual to declare bankruptcy. 

  1.  Medical expenses 

A chronic medical condition can impact an individual’s physical and mental abilities. For proper treatment that is likely to be ongoing, an individual may be forced to spend a considerable amount of money on medical expenses. Rare or severe medical conditions can result in hundreds of thousands of dollars in expenses, impacting an individual’s financial future. 

  1. Loss of income 

At times, a sudden layoff or a sudden disaster can impact an individual’s capacity to earn. This can deplete the savings of even the most cautious among us and may lead to a loss of financial stability. 

  1. Excess use of credit 

Many cannot control their urge to shop, which may lead to financial instability later. An individual can contact a Pennsylvania bankruptcy lawyer before declaring bankruptcy to understand the pros and cons associated with the process. 

In addition, unexpected expenses can also impact an individual’s decision to declare bankruptcy. This may occur because of disasters and issues of theft or loss of property. 

Understanding the consequences of bankruptcy 

Bankruptcy is a serious decision that may have a significant impact on your future. With bankruptcy, most debts are written off, but it can also lead to various restrictions. Here are some of the consequences associated with bankruptcy: 

  • The negative impact on your credit score is going to depend on the type of bankruptcy you file and how well you handle your new finances after filing.
  • The damage to your credit score will not persist forever, but the bankruptcy may stay on your credit report for seven or 10 years, depending on which type you file.
  • Bankruptcy filers will have an easier time getting new lines of credit, but may be limited in terms of the credit they can get.
  • Filing for bankruptcy means there are certain things you are prohibited from doing in the future. For instance, if you have a business, you may be prohibited from starting up a similar business in the future.

It is often recommended to consult a reputable Pennsylvania bankruptcy attorney to get assistance in this matter. Law professionals understand how to handle and deal with this situation. 

What are the different types of bankruptcies that one can file in the United States? 

If you are thinking about bankruptcy, it is important to understand how it will impact your finances and credit score. By understanding these consequences, you can prepare for them before filing. Before that is possible, though, you have to know which type of bankruptcy is best for your situation. There are six types of bankruptcies that one can file in the United States. 

  1. Chapter 7: Liquidation 

With a Chapter 7 bankruptcy, you can have your debts discharged. You are not required to repay any creditors with this type of filing.  In order to qualify, you have to meet income requirements. In general, individuals can only file if their income falls below the median annual household income for their state and family size.

  1. Chapter 13: Repayment Plan 

In a Chapter 13 bankruptcy, you will repay your debts. In order to file for this type of bankruptcy, you must have a regular, steady source of income at the time of filing.  It is common for people who are considering filing to do so because they want to keep their homes while getting rid of other debt. 

You can receive assistance from a Pennsylvania bankruptcy law firm to understand details of this type of bankruptcy. They can help you with filing and the court procedure. 

  1. Chapter 11: Large reorganization

A Chapter 11 bankruptcy usually results in reorganization of your debts. This type of filing is usually used by businesses, but can also be an option for individuals with large amounts of debt and valuable assets.  An attorney is often necessary to file this type of bankruptcy.

  1. Chapter 12: Family Farmers

A Chapter 12 bankruptcy is for farmers and fishermen. Like a Chapter 13, it allows you to repay your debts with the help of a court-approved payment plan.

  1. Chapter 15: Foreign cases 

A Chapter 15 bankruptcy allows for individuals to file a case in the U.S. Bankruptcy Court after a case has already been filed in a foreign country.

  1. Chapter 9: Municipalities

This type of bankruptcy is typically used by municipalities, such as cities and townships. It is generally used when a city or township cannot meet its financial obligations and needs additional time to repay its debts.

Filing for bankruptcy in Pennsylvania

These are the types of bankruptcies that individuals, corporations, and municipalities can consider. Before filing for bankruptcy, it is important to understand what type of case will have the best outcome. If you are not sure which one is best for your situation, you should consult with a lawyer or talk with the court clerk in your area.

It is important to get the right advice if you are thinking about filing for bankruptcy. Make sure to talk with a lawyer and figure out which type of filing will work best in your situation. After that, make sure to file on time and prepare yourself for life after bankruptcy. 

Bankruptcy can alleviate a lot of financial stress.  You can start over by getting rid of many types of debt. By understanding the consequences, you can prepare for them before filing. With the right advice and preparation, bankruptcy offers a fresh start to people who are struggling to get ahead financially.

After consulting with an attorney or reviewing your case file, if you decide bankruptcy is the right option contact a reputable Pennsylvania bankruptcy attorney. He can help you with the legal proceedings and save you from long-term financial loss. 

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