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Do You Need to Complete Debt Relief Before for Filing Bankruptcy in Pennsylvania?

Before you can file for bankruptcy in Pennsylvania, there a few things you must do. So, will your pre-bankruptcy checklist include completing debt relief?

Completing debt relief is not mandatory before an individual can enter into bankruptcy in Pennsylvania. Debtors do have to complete credit counseling courses, which provide guidance on money management and budgeting, among other financial matters. Debt relief programs are handled by companies whose primary concern it is to lower the debt you owe in exchange for a fee. These programs are not guaranteed to be successful, nor do creditors have to negotiate with debt relief companies. Compared to bankruptcy, debt relief is not necessarily a reliable way to fully address your outstanding debt in Pennsylvania.

To have the Pennsylvania bankruptcy lawyers of Young, Marr, Mallis & Associates assess your case for free, call our team today at (215) 701-6519.

Do I Need to Complete Debt Relief Before Filing My Bankruptcy Case in Pennsylvania?

Debtors do not have to work with debt relief companies before filing Chapter 7 or Chapter 13 in Pennsylvania. That said, debtors do have to complete a credit counseling course in order to be able to declare bankruptcy.

Debt relief programs and credit counseling courses are different things. Debt relief companies will negotiate with creditors on behalf of a debtor in an attempt to reorganize debt or lower the amount a debtor owes. This is not the same as enlisting our Philadelphia bankruptcy lawyers to negotiate with your creditors to avoid bankruptcy. Working with debt relief companies is somewhat risky, depending on the size and category of debt an individual has.

Completing credit counseling before bankruptcy is mandatory, however. In Pennsylvania, debtors must complete credit counseling within 180 days of filing a bankruptcy petition. If you do not complete credit counseling before filing, your case will likely be dismissed. In rare situations, debtors might be permitted to complete credit counseling while in bankruptcy. Credit counseling courses will provide debtors with advice and assistance regarding how to handle their finances properly. These courses generally cover subjects like budgeting and money management. Taking credit counseling courses is not the same as working with debt relief companies. Credit counseling will help you after you exit bankruptcy, as you will be better equipped to handle your finances once your debt has been addressed.

Should I Complete Debt Relief Before Filing for Bankruptcy in Pennsylvania?

Although completing debt relief is not mandatory before entering bankruptcy in Pennsylvania, it is an option. But is it a good one?

When considering the possible outcomes debt relief can lead to, it is also important to consider the negative ones. Debt relief companies typically charge high fees, which debtors might not be able to pay, causing them to fall further into debt. Furthermore, some creditors might not want to work with debt relief companies, whereas they might be more likely to negotiate with our attorneys. Because debt relief companies simply aim to lower the debt you owe, they might not be concerned with safeguarding your credit score or protecting your assets.

Suppose you are interested in debt consolidation to avoid bankruptcy or believe some of your creditors might be open to negotiations. In that case, it is best to work with our lawyers instead of a company that offers debt relief services. Our attorneys can identify errors on a creditor’s behalf, such as predatory lending practices or other inappropriate behaviors, that might ultimately help your case. Furthermore, our attorneys can negotiate a debt consolidation plan that more accurately meets your needs and is financially practical so that you can complete your repayment plan and avoid further financial distress.

Comparing Debt Relief and Bankruptcy in Pennsylvania

Like credit counseling and debt relief, debt relief and bankruptcy are two separate things. Bankruptcy is a legal process individuals can use to address debt that happens through the courts in Pennsylvania. Debt relief is a service companies provide and is not guaranteed to help you repay your debts.

Addressing Debt

When comparing debt relief programs and bankruptcy, bankruptcy is generally the surest way for debtors to begin rebuilding their financial stability. When working with debt relief companies, there is no way to for debtors to know if their efforts will be successful. Instead, individuals might incur expensive fees from debt relief companies and still have all their debt to repay. Bankruptcy, on the other hand, can allow you to tackle your debt in full. The way in which your debt will be repaid will depend on the bankruptcy chapter you file in Pennsylvania.

Automatic Stay

When you file a bankruptcy petition, an automatic stay will take effect. This puts a stop to any debt collection activities from creditors, including upcoming mortgage foreclosures, sheriff’s sales, and wage garnishments. An automatic stay is not afforded to debtors when they engage in debt relief programs in Pennsylvania.

Debt Discharge

Furthermore, in bankruptcy, some of your debts might be erased. Popular debts, like credit card and medical debt, are dischargeable in bankruptcy, meaning you will have no responsibility to repay them. While debt relief companies might negotiate a lower payment on your behalf, they cannot discharge debts in the same way that bankruptcy can.

Protection of Assets

Among its other benefits for debtors in Pennsylvania, bankruptcy also allows you to protect your assets from liquidation or repossession. Our attorneys can help you use federal or state exemptions when you file Chapter 7 so that you do not lose your home or car to creditors. If you file Chapter 13, your debt will be consolidated under the same interest rate, and you will make payments toward your debt according to your income and expenses.