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Bryan P. Keenan

Pittsburgh Bankruptcy Legal Blog

Personal bankruptcy and its impact on credit scores

Regardless of the level of debt a Pittsburgh resident has, one of the main obstacles to moving forward with personal bankruptcy is concern about how it will damage credit. This is true whether it is a Chapter 7 bankruptcy in which there is a liquidation of the person's assets; or a Chapter 13 bankruptcy where a payment plan is initiated and the person makes reasonable payments that he or she can afford, generally over a five-year period.

This is an understandable worry and it is important to think about how the credit reports will be affected. Often, people find that the positives of a bankruptcy far outweigh the negatives such as credit issues.

Questions to ask when calling an attorney for bankruptcy help

You've finally come to the realization that bankruptcy may be the only way to escape your debt and live a better financial life in the future. While it's a stressful time, taking the right steps at the right time will help ease the tension and put you on the right path to success.

While you have the legal right to file for bankruptcy on your own, it's typically best to consult with an experienced attorney. Here are some of the many questions to ask when discussing your situation with a bankruptcy attorney for the first time:

  • Does it make sense for me to file for bankruptcy? You've done your research, but you still don't know everything about bankruptcy law. Your attorney can review the basics of your situation, and then provide feedback on whether Chapter 7 or Chapter 13 makes sense at the present time.
  • What type of bankruptcy is the right choice? There are many differences between Chapter 7 and Chapter 13 bankruptcy. For example, you can discharge some or all of your debt in Chapter 7, thus giving you a fresh start. But with Chapter 13 bankruptcy, you're required to use a repayment plan to pay back some of the money you owe.
  • How long does bankruptcy take? This depends on a variety of factors, including the type of bankruptcy. Chapter 7 bankruptcy is the quicker of the two, with the process typically coming to an end within six months. With Chapter 13 bankruptcy, you can expect your repayment plan to last three to five years.
  • What's the best way to prepare for bankruptcy? There are things you should and shouldn't do as you close in on bankruptcy. It's critical to collect all necessary financial records, such as tax returns, pay stubs and bank account statements. At the same time, you want to avoid things such as gifting assets in an attempt to hide them from the court.

Credit card debt is a growing concern for younger adults

In Pennsylvania and across the United States, credit card debt, student loans and other financial concerns are gaining greater attention. People are seeking strategies to get back on stronger financial ground as researchers examine the cause and effect of these financial factors. While recent studies and stories have centered on millennials and their debt woes, Generation Z was found to have problems of its own despite being a few years behind their older counterparts. Regardless of the age range of the debtor, credit card debt is a worrying problem and legal assistance might be useful to get it under control.

As millennials owe nearly $28,000 in debt, Gen Z -- whose maximum age is 22 -- are in debt for just shy of $15,000. The study was conducted by Northwestern Mutual. An advisor for the company states that this is now a normal part of life. People who complete their schooling and have yet to begin work are already in debt. This is a radical change from three decades ago.

Chapter 7 bankruptcy might be preferable to other debt solutions

When a person is dealing with significant debt in Pittsburgh, they might feel a reluctance to consider personal bankruptcy. Television, the internet and other media entities have many advertisements that extol the virtues of alternatives to bankruptcy, while claiming that bankruptcy will be a negative. It is important to understand the truth about Chapter 13 bankruptcy and Chapter 7 bankruptcy before turning to ideas that can do little more than make the financial problems worse.

Many companies will push debt consolidation. With this strategy, the person's financial obligations will be packaged into a single loan. There will be a monthly payment, and it is perceived to be a lower amount than what the person is otherwise paying. Credit counseling services will assist the debtor in a reorganization of the financial situation with a plan to pay the debts without needing to go through bankruptcy. Some will suggest the person get additional loans to pay off what is owed and steer clear of bankruptcy. Examples include borrowing money on the equity of a home, borrowing against assets or getting a second mortgage.

Getting back on track after Chapter 7 bankruptcy

For those in Pittsburgh who are experiencing financial trouble and are considering bankruptcy, their concerns go beyond the process of bankruptcy itself. Their worries extend to what happens after they have filed. This is true whether it is a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. When considering how to get back into a better financial situation after the bankruptcy filing has been completed and approved by the court, it is wise to know the fundamental ways to rebound.

It is not uncommon for people who have filed for bankruptcy to experience improved credit relatively quickly -- within a year or two. To make sure things are progressing, it is important to keep up to date on credit by paying attention to the credit report. If there are issues or inaccuracies, they can be addressed. Often, people will try to expedite their credit improvement by using one of the frequently advertised credit repair companies. These will come in droves after the filing. Some are legitimate, but many are simply seeking money and do not do anything to help the debtor.

Can filing for bankruptcy help me with my IRS tax debt?

The Internal Revenue Service (IRS) can spark fear in a person just by sending a letter or making any type of contact about IRS tax debt. Pittsburgh residents who are dealing with this issue and are told they owe payments on their taxes will be worried about what the future holds. This is compounded if they are already having financial problems and cannot make their payments for credit cards, mortgages, automobiles and more. Fortunately, bankruptcy can help with tax debt.

The circumstances must be right for this to be done and it is not always possible, but when there are concerns about this problem, legal advice is essential. Generally, it is easier to discharge tax debt with a liquidation bankruptcy through Chapter 7.

Plan to take control of your financial future

Many adults don't ever take the time to sit down and review their bills. When you do, you might realize that you are in more debt than you originally thought. The issue with many forms of credit is that people can get stuck paying for only the minimum payments. On accounts that are accruing interest, you might not notice much headway in the balance reduction if you are only paying for the bare minimum each month.

If you have taken a hard look at your finances and realize that your current plan isn't going to get you out of debt, it is time to do something about it. Some people try to get those debts paid off faster by paying more on them. This is a good idea for some, but only if they have a good plan and the capability to follow that plan.

Credit card debt worse than student loans for Millennials

Pennsylvanians will be at an immediate disadvantage when they graduate from college with substantial student loan debt. This can affect every decision they make from where to live, what job they should take, whether they should get married or not and more. Credit card debt is also a problem for many as they frequently need to use credit cards to purchase necessities when they are short on cash. This leads to a rising tide of debt. For those who think student loan debt is worse than credit card debt, new information is contradicting that narrative.

A recent study says that Millennials are increasingly having trouble with credit card debt and that might be surpassing student loans in terms of hindering their lives. The study says that 13 percent of Millennials who owe on their credit cards are paying the balance each month. The remainder are piling debt upon debt. Eventually, this can reach a critical mass where they are essentially spinning their wheels with nowhere to go. On average, the credit card debt is $5,700. Paying the minimum will do little to reduce that.

Credit card debt, loans and other expenditures deplete savings

Pittsburghers and people across Pennsylvania will be well-acquainted with debt no matter their situation. Even those who have a good job and have a commensurately good salary will have various debts. For those on the lower rungs of the economic ladder, it is often necessary to accrue debt to attend school, purchase a home and make ends meet. However, various expenditures -- credit card debt, student loans and mortgages -- are increasing. It is at the point that people are unable to save significant money in bank accounts or make investments, if they can do that at all. As debts rise and problems come up, it can leave debtors in desperate financial straits.

If, for example, a person is barely making the minimum payments on debts every month and a sudden medical issue forces them to enter the hospital or they lose their job, they can find themselves well behind on their payments. This is a cycle that is difficult to escape. The lenders are aware of the danger Americans are in and how they are forced to use credit cards, lines of credit and refinancing to stay one step ahead and purchase needs and wants. They will make offers that debtors accept and will rapidly make their issues worse.

Get out of debt quickly with Chapter 7 bankruptcy

While there are several types of bankruptcy that can be beneficial for Pittsburgh debtors, only Chapter 7 has the benefit of getting out of debt quickly without needing to pay back any money to unsecured creditors. Of course, Chapter 7 bankruptcy is not suitable to every situation, but for those who either do not have significant property and assets or have property that they are willing to allow to be part of a Chapter 7 liquidation, this is likely the best alternative. Understanding the foundational aspects of a Chapter 7 filing is imperative before deciding.

Chapter 7 is not a good idea for people who have secured debts and could lose a house or a car. However, if there are significant unsecured debts like credit cards, these can all be wiped away with a Chapter 7. If there is a home or a vehicle and the person wants to retain it, there are options to do so if the payments continue to be made. This will depend on the circumstances and creditors might object, making it important to discuss the possibility with a legal professional.

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Bryan P. Keenan & Associates, P.C.

993 Greentree Road
Suite 101
Pittsburgh, PA 15220

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