Top 5 Reasons to File for Bankruptcy in Pennsylvania

Bankruptcy can seem like a daunting decision for many individuals and businesses facing financial challenges. However, when managed appropriately, it can serve as a vital tool for regaining financial stability. If you're residing in Pennsylvania and are considering this route, you may be wondering what benefits bankruptcy can provide. Here are the top five reasons to file for bankruptcy:

1.  A Bankruptcy Filing Stops in Their Tracks Foreclosures, Evictions, Repossessions, Garnishments, and Other Creditor Actions

Filing for bankruptcy automatically triggers an "automatic stay," which temporarily halts most collection actions against you. This means that creditors can no longer contact you, garnish your wages, or pursue lawsuits to collect debts. You cannot be evicted from your home.  Nobody can repossess your car or your belongings.  The automatic stay provides crucial breathing room, allowing you to focus on your situation without the pressure of continuous harassment from creditors, lenders and landlords.  In circumstances where you are facing foreclosure, the automatic stay can even provide you with the time needed to catch up on missed payments or negotiate alternatives with your lender.

2.  A Bankruptcy Can Stop Utility Terminations and Even Restore Terminated Service

A bankruptcy filing stops any threatened utility terminations and restores terminated service, at least for 20 days. To keep utility service beyond 20 days after the bankruptcy filing, a security deposit (usually equal to approximately twice the average monthly bill) must be paid and the consumer must keep current on new post-bankruptcy utility charges but need not pay the past-due charges incurred before the bankruptcy was filed. Often the consumer can take 60 days to pay the deposit and some utilities may not require a deposit.

3.  Debt Relief

The primary purpose of bankruptcy is to provide relief from overwhelming debt. Whether it's medical bills, credit card debt, or personal loans, filing for bankruptcy can lead to a discharge of your unsecured debts. This means that once your bankruptcy is finalized, you're no longer legally obligated to pay these debts, allowing you a fresh start financially.

Certain debts may not be discharged, such as most taxes, alimony, child support, and debts incurred after the bankruptcy case was started. Federal student loans can be discharged only if repayment will be an undue hardship on the consumer’s family. Certain private student loans can be discharged in bankruptcy.

In Pennsylvania, individuals typically consider either Chapter 7 or Chapter 13 bankruptcy, both of which offer different paths to debt relief. While Chapter 7 may liquidate certain assets to pay off creditors, Chapter 13 allows for the reorganization of debts and repayment plans over time.

4. Opportunity for a Fresh Start

Declaring bankruptcy can give you an opportunity for a fresh financial start, particularly for individuals who find themselves trapped in a cycle of debt that feels insurmountable. By discharging your debts, you can emerge from bankruptcy with just a clean slate, which can allow you to rebuild your financial life more effectively.

While filing for bankruptcy may initially impact your credit score, it doesn't have to spell long-term financial doom. In fact, many people find that they can start to rebuild their credit within a few short years of filing. After debts are discharged, your debt-to-income ratio improves, making it easier to qualify for credit products in the future.

Additionally, responsible use of credit after bankruptcy—including secured credit cards and small loans—can help you demonstrate creditworthiness. With time and prudent financial management, many individuals see their credit scores rise, enabling them to make significant purchases, such as homes or vehicles, again.

5. Protecting Your Assets

Many Pennsylvania residents may believe that filing for bankruptcy will result in losing all their possessions. However, Pennsylvania law offers various exemptions that can protect essential assets. For example, your primary home (up to a certain equity limit), personal belongings, retirement accounts and a vehicle (up to a certain value) may all be exempt from liquidation during bankruptcy proceedings.

Working with an experienced attorney can help you navigate the exemptions available to maximize your protection and minimize the impact on your assets.

Is Bankruptcy Right for You?

Deciding whether to file for bankruptcy is a deeply personal decision that requires careful consideration. It's essential to evaluate your financial situation fully and seek professional guidance from a qualified attorney. If you’re grappling with insurmountable debt, the benefits of bankruptcy may provide the relief you need to regain control of your financial future.

Fiffik Law Group has experienced bankruptcy attorneys who are dedicated to helping individuals navigate financial hardships. We encourage anyone uncertain about their options to reach out for a consultation. Together, we can explore whether bankruptcy might be the right solution for your unique situation, helping you embark on a path toward financial recovery.