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For some, there is no alternative program that will assist them in overcoming  the burden of debt except Bankruptcy. Although Bankruptcy comes with a lot of consequences, it does offer the individual using this program the possibility of wiping out their entire  debt with a “single stroke of the pen.”

Bankruptcy comes in several forms but the two forms that normally  apply to individuals, are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy : Generally applies to individuals or a sole proprietorship. The non-exempt assets of the individual or business are sold off and the proceeds are used to pay the creditors involved. There is a specific order as to whom will receive those proceeds and that is called “priority debts.”

Property that is exempt from being sold off varies state to state but generally refers to the individual’s primary residence, car and personal items. Vacation homes for example will be sold off to pay back the priority debts.

Chapter 7 Bankruptcy does require a test for eligibility. This is to say we cannot all go out and file Chapter 7 because we do not want to pay back our creditors but will require an extensive look at your finances before the court will allow you do go through with the filling or process.

Chapter 13 Bankruptcy : Unlike Chapter 7 where the entire debt is wiped clean, Chapter 13 is a restructuring of the debt and a plan to repay it over time. This type of Bankruptcy is used by businesses more often than not in order to continue operations. Chapter 13 allows the business or individual to avoid the liquidation of any property associated with the debt. (as long as the repayment schedule is maintained) One of the other benefits of Chapter 13 is you may not have to pay the entire amount borrowed. This of course is a negotiating process done with your creditors and your attorney.

The Consequences : Your credit score will fall to the lowest point possible and obtaining new credit will be next to impossible for many many years. A Bankruptcy can stay on your credit report for up to ten years. It is a matter of public record, meaning anyone can intrude into your private life and see you have filled or have gone through Bankruptcy. You will lose some of your property you have obtained such as a vacation home, boat or motorcycle if it is not your primary means of transportation. In some instances you will no longer be eligible for certain types of employment.

The sad reality is Bankruptcy is truly a last resort and in some cases not even affordable to certain individuals. Although it will give you a fresh start, it comes at a rather high price.

Debt Not Eligible for Bankruptcy : Alimony, Child Support, Federal Student Loans, IRS Debt and Other Forms of Government Associated Debts. (Ultimately this is a negotiation process between your creditors and your attorney, debts you may have thought were were eligible for discharge may in fact, not be) Call 866-881-8125

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