If you’ve ever played Monopoly, then you, along with millions of other players, falsely learned that filing for bankruptcy is a move that sends you straight to the Poor House and ends your turn as the loser of the game. Thankfully, this is far from the truth in real bankruptcy! In the real world, bankruptcy is a financial tool that can actually save people and give them a fresh start toward success. Rather than being a flag of defeat, bankruptcy is more like a playing card that helps families do away with their heavy debt load and put them in a better financial position to play the game of life.
How Bankruptcy Works in the Real World
Bankruptcy is simply a court process that works to do away with or rearrange debt so that it becomes more manageable. A bankruptcy involves a judge and a court-appointed trustee who look into the financial situation of the individual or business that needs help and the lawyer advocating for the individual. If the court determines that the debt load is truly too much to manage, they can discharge the debts through a Chapter 7 bankruptcy or refinance them through a Chapter 13 proceeding.
Who Can File for Bankruptcy in Philadelphia?
Bankruptcy is put in place for those who have more debt than their income will allow. While businesses can file for bankruptcy, it is individuals and families that make up the majority of bankruptcy cases. When credit card bills, medical expenses, student loans, and car payments become overwhelming, people may choose to file for bankruptcy so that the debt is erased completely through a Chapter 7 or refinanced in a Chapter 13 bankruptcy. Even those who can cover their bills may opt for a Chapter 13 bankruptcy just so that they can have more manageable payments that allow them extra money for living expenses.
See also: Is It Possible to Discharge Student Loans Through Bankruptcy?
Bankruptcy Equals a Second Chance
Rather than squelching people, bankruptcy offers a fresh beginning and a second chance. In 2020, there were 544,463 bankruptcies filed in the United States. Smart people recognized when their debt load was too heavy to bear and used bankruptcy to move forward in life. With the pandemic, bankruptcy is becoming more and more of a societal norm. Not only does bankruptcy do away with debts, but it can also work to stop a foreclosure or a vehicle repossession. If your wages are being garnished, a bankruptcy may also put a halt on that.
It’s Not Without Flaws
While bankruptcy is a good tool to get out of debt, it is not perfect. Bankruptcy can take a temporary hit on your credit score, so if you have a high score you may need to weigh the negative impact. Additionally, depending on the type of bankruptcy you file you may have a payment plan in place rather than discharge your debt.
When is Bankruptcy the Right Choice?
The choice to file for bankruptcy can be challenging, however, a good rule of thumb is to ask yourself if you could pay off all your debt within the next five years. If you are simply feeling the pinch of some high credit card debts of several thousand dollars, you might do better to simply switch the balance to a lower-interest card. On the other hand, if you are feeling overwhelmed with debt and unsure where to turn, bankruptcy may be just what it takes to regain your financial footing.
Areas Where Bankruptcy Doesn’t Help
While bankruptcy helps to eliminate many types of debt, it doesn’t cover them all. Child support, alimony, federal student loans, and DUI fines are all items that you will likely be left needing to be paid off even after filing for bankruptcy. Bankruptcy can help by doing away with other debts and giving you more money to put toward these. You also can’t expect to go on a shopping spree right before you declare bankruptcy, since many debts that come six months before filing aren’t covered.
See also: Can Bankruptcy Stop Child Support in Pennsylvania?
Contact a Bankruptcy Attorney Today!
While bankruptcy may have lost us the game of Monopoly, in the real world it can be just the playing card needed to get you back on track financially. If you’re weighing your options about bankruptcy, contact our team today. Our lawyers will help you look over your financial situation and get a realistic view of how bankruptcy can impact your life. If you choose to move forward with a bankruptcy, we can guide you through the process. Contact us today to set up a free consultation!