The Top Five Reasons Why People File for Bankruptcy in Pennsylvania



By:Mike Cibik

Reason Why People File for Bankruptcy

Filing for bankruptcy can save money and offer peace of mind. There are also the downsides. Bankruptcy is very expensive and takes up a lot of your time. At the end of the day, however, it’s very much worth it.

Here are some reasons why people file for bankruptcy, according to the American Bankruptcy Board Certified attorneys of Cibik & Cataldo PC, who have provided high-quality debt relief in Philadelphia for the last 35 years.

Job Loss – Sure, there’s the severance pay, but there’s no guarantee knowing when that new job will come around. Losing a job obviously depletes someone’s savings and assets. There are resources one could look into should they be without employment for some time, especially if there is a valid reason as to why they can’t work, such as an injury or a disability. The loss of a job could be why someone may look into the likes of best long term disability insurance if they feel they won’t be working for the foreseeable future.

Medical Expenses – Medical expenses make up more than 60 percent of personal bankruptcies in the United States. It can be almost impossible for someone to pay for the medical attention they need on their own most of the time.

Credit Debt – Illnesses and disability, job loss, income reduction and emergency expenses are some reasons for credit card debt that doesn’t involve irresponsible spending.

Divorce – A divorce or separation can lead to a huge loss of income and assets for either partner or both. Those lawyer fees add up too.

Overspending – Poor budgeting and not being able to control your spending.

Types of Bankruptcy to Choose From

There are two types of bankruptcy that you can file, Chapter 7 or Chapter 13.

A Chapter 7 bankruptcy discharges most types of unsecured debt and the trustee will attempt to sell any nonexempt property in an effort to repay their creditors. Chapter 7 bankruptcy is most commonly used for businesses and individuals.

In regards to the business aspect, the trustee who is handling the case goes through an intense process of assessing how every part of the business is running and then will either decide to shut down the company (if it is smaller) or sell off parts of it (if it is large).

For individuals, Chapter 7 lets them keep certain property, but if the state deems it as not exempt, it is to be sold by a trustee, and that money is used as a liquid asset to pay the creditors. If you’re lucky, your debt can be discharged if you fall into the categories of people who owe:

  • Child Support
  • Some Student Loans
  • Income taxes less than 3 years old

It is good to keep in mind that Chapter 7 bankruptcy can stay on ones credit history for up to a decade. So before filing, make sure you are ready to have that on your record for a long amount of time so no credit issues will surface when trying to make purchases once you are back on your feet. Chapter 7 bankruptcy normally takes about 3-to-4 months to finish. A bad credit score will make it much harder to apply for any type of loan, whether it be a short or long term loan. Using Credit Cards to Build Credit is a good way to show potential lenders that you’re now responsible for money and can manage personal finances. However, it won’t be easy trying to prove your trustworthiness after filing for bankruptcy so make sure you know it’s the right decision before filing. You may be able to apply for a secured loan but it might be worth doing some research before completing a secured loan application if you are looking to file for bankruptcy.

Creditors with Chapter 13 bankruptcy, meanwhile, repay creditors through a repayment plan. No property is liquidated under Chapter 13 bankruptcy, only reorganized. Chapter 13 can immediately stop foreclosure for the term of repayment; it can also allow for a “super discharge” of debts, the kind that are not allowed under Chapter 7 bankruptcy.

There are many reasons why a person may choose to file for Chapter 13, but the most common reasons are:

  • Individuals facing an imminent repossession of property.
  • Individuals facing an imminent foreclosure on their home or other real estate.
  • Individuals who have recently lost their primary source of income but do not want to lose their property.
  • Individuals with a poor credit score who, due to current financial situations cannot pay off debt quickly.

Chapter 13 bankruptcy can take 3-to-5 years to finish which is much longer than the amount of time Chapter 7 requires. But, Chapter 13 bankruptcy can only stay on your credit history for 7 years, opposed to the decade Chapter 7 stays on for.

It is important to choose one of the bankruptcy plans listed above that fits you and your current situation best. Talking to an experienced attorney will help clear the air of any unanswered questions and help put your mind at ease knowing that someone is on your side.

At Cibik & Cataldo P.C., we never assume that your financial situation is the same as anyone else’s. Our team of dedicated attorneys are here for you and will work with you on your case, no matter how big or how complex it may be. Declaring for bankruptcy is never a proud moment, but is a great tactic to get you back on your feet financially.

Our legal team supplies top-notch debt help in Philadelphia, PA, and surrounding areas. To learn more about bankruptcy services and the certain areas of bankruptcy our attorneys specialize in, contact us at (215)-735-1060. We also offer a free consultation through our website so you can get the feedback you need fast.


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