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Bankruptcy: Should You File?

Bankruptcy. The word alone may trigger feelings of uneasiness and stress. There are many misinterpretations about bankruptcy and what it is. To ease your tension, read on below or contact Casale & Bonner P.C. today!


Chapter 7 vs. Chapter 13 Bankruptcy

Both Chapter 7 and Chapter 13 bankruptcy cases can help individuals free themselves of their debt obligations. You can get a new start and live a higher quality life, no longer burdened by the constant weight of debt on your shoulders. There are some differences between the two types of bankruptcy, however. 


Chapter 7

Chapter 7 bankruptcy is the most common type of bankruptcy in the United States. Suited for those who have little to no money after paying their basic expenses, this type of bankruptcy is beneficial because you can discharge your unsecured debt. Keep in mind, though, that child support, taxes, and alimony are typically unable to be discharged.


Chapter 13

Think of Chapter 13 bankruptcy as a repayment plan. Under this plan, you will be able to keep your property but will have to create a plan to repay your debts, typically within a 3 to 5 year period. The good news is, in some cases, a Chapter 13 can reduce your interest rates and some tax liabilities. This plan is best suited for individuals who can pay their basic expenses and have a steady income. 


There are pros and cons to both types of bankruptcy. Give us a call at 570-326-7044 to further discuss the differences and which is the best option for you!


Common Bankruptcy Myths

“I’m a failure if I file for bankruptcy.”

Most people file for bankruptcy for reasons out of their control, such as job loss or medical debt. Even if you merely mismanaged your money, filing for bankruptcy is your acknowledgment of the issue and your effort to fix it—that doesn’t make you a failure if you ask us!


“I’ll never be able to get credit ever again.”

While most mortgage lenders will make you wait for a couple of years before you apply for credit, many credit lenders will start sending you credit offers in the mail just weeks after going through bankruptcy. Why? Because you just eliminated a lot of your debt obligations! You may pay a higher interest rate right after bankruptcy, but it will be a good way to re-establish a good credit score. 


“Bankruptcy is too expensive for me.”

While filing for bankruptcy can cost a few thousand dollars, think about all of the debt you will be eliminating in the process. Treat it as an investment that, when done correctly, can lead to a better financial position. 


“I’ll lose all my property!”

Thanks to something called exemptions, you won’t lose all of your assets when filing for bankruptcy. Exemptions are different for each state, but in Pennsylvania, bankruptcy exemptions are some of the most limited in the country.


Depending on whether you choose Pennsylvania’s exemptions or the Federal exemptions (you have to choose either or), you can save things such as clothing, retirement savings, and more.


“I’m going to just pay off my debt, that’s always the better option.”

If, after speaking with a financial manager or bankruptcy attorney, the two of you create a viable plan to pay off your debt in a reasonable amount of time, absolutely do that. However, sometimes there is so much debt that you may never be able to get under control. Bankruptcy can eliminate most of that debt, and with disciplined financial management, you can build excellent credit in as little as two years. 


“ALL of my debts will disappear!”

Like most things in life, there are always exceptions. Yes, most of your credit card debt, personal loan debt, and medical debt will be discharged, but student loans, income taxes, and domestic support obligations will not be discharged, in most cases. 


“I make too much money to file for bankruptcy”

You see it all the time; athletes, celebrities, and everyday people that are considered “rich” filing for bankruptcy. Nearly anyone can file for bankruptcy. In a Chapter 7 bankruptcy case, you must pass a “means test.” This test merely determines if you have enough money to make a “meaningful dent” in your debt. If not, you will be able to file for bankruptcy. If the means test determines that you CAN make a dent in your debt, you can almost always file a Chapter 13 bankruptcy case. 


“I can’t file for bankruptcy, I’ll get fired if I do!”

While bankruptcy laws that outlaw discrimination exist, employees can get fired for many reasons. It is hard to prove discrimination. That being said, most employers only take bankruptcy into consideration if you’re dealing with money. Again, bankruptcy signifies that you are making a concerted effort to fix your finances, which looks better than a pile of debt that continues to build.


“Finally, all my financial problems will be gone”

Yes, bankruptcy can eliminate your debt obligations. It won’t, however, change your spending habits, income, financial management, lifestyle, or personal issues. Only you can change those. Bankruptcy is a chance to start over. Adjust your spending habits, determine if your job is paying you enough, and create a strong money management plan.


So is Bankruptcy Right For You?

Bankruptcy can be a stressful and confusing process. There is a lot that goes into the decision to file for bankruptcy. It’s imperative that you consult one of our highly skilled attorneys at Casale & Bonner P.C., who can evaluate your situation and help determine whether filing bankruptcy is a good decision for you.


Wondering if bankruptcy is right for you? Call Casale & Bonner P.C. at 570-326-7044!