Filing for bankruptcy can be one of the scariest things that one can ever do. Issues such as unemployment, large medical bills, a huge amount of debt, and marital problems can force one to file for bankruptcy.
Filing for bankruptcy is not a decision that should be taken lightly; you need to know the options that are available before you proceed with the decision and what to expect after filing for the bankruptcy.
When filing for bankruptcy in Pennsylvania, these are some of the things that you should know.
- Decide if indeed bankruptcy is right for you
Before you file for bankruptcy, first you need to figure out whether you are a good candidate or not. It may be right option for you if you are being sued for debts. Bankruptcy may also be good for you if your home is about to be foreclosed because it may allow you to catch up with late payments.
You also need to assess your prospects and the consequences that you will have to face as a result of the bankruptcy because it can have an effect on your promotion, when applying for a new job, when renting a new apartment, etc.
- There are different types of bankruptcy
Now that you have determined that bankruptcy is the best option for you, next thing is to choose which bankruptcy is right for you. There are two types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 bankruptcy is a liquidation form of bankruptcy that can discharge all or most of your debts. It is possible for people who file for Chapter 7 bankruptcy to keep most of their assets. The entire process can last up to four months.
Chapter 13 bankruptcy is a form of reorganization which entails creating a payment plan to pay back creditors over a period of time. No property is required to be liquidated in the process, but it can take between three to five years to finalize everything. To be eligible for this type of bankruptcy, you need to have a regular income to make the required monthly payments.
- Bankruptcy will affect your credit
Filing for bankruptcy could have a negative impact on your credit history even if it were good. And to add salt to the injury, it can stay in your credit report for up to ten years. You are also required to declare your bankruptcy to your future employers, on medical forms, or on any other state official reports.
So even after several years after filing for bankruptcy, you will still have to click that box on many official forms. All these means that bankruptcy follows you for the rest of your life, so you should make sure that it is your last option. Bankruptcy will affect your credit report and drop your credit score by as much as 240 points.
- Bankruptcy won’t fix everything
Filing for bankruptcy cannot give you a fresh start with your financial problems. It doesn’t fix everything instantly. You may lose some of your assets or money in the process. You should figure out how you ended up in this situation and how to avoid it in the future.
You also need to revise your spending habit and even talk to a financial coach. You can also seek the services of a financial planner to help you make wise decisions so that you don’t find yourself filing for bankruptcy for the second time.