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3 things you should know about bankruptcy

Many people carry high credit card debt or medical bills, and if financial circumstances change, it can be challenging to keep up with these debt payments. Getting trapped in overwhelming debt can happen quickly and soon become unmanageable.

This is not just an issue for young people who may have taken out a credit card without sufficient income. Many times, financially well-established couples get in over their heads with debt as they are heading into retirement. The good news is that there are options for people who feel suffocated by a massive debt load. Filing for bankruptcy is often the first positive step for building a fresh financial future.  

1. Bankruptcy is an option even if you have income

There are different types of bankruptcy filings, making this option suitable for a range of different situations. For example, if you have a steady income, you may decide to opt for Chapter 13 bankruptcy, commonly known as a debt reorganization. This type of bankruptcy allows you to work to pay off your bills over time, and in so doing, can protect you from losing valuable assets.

2. Bankruptcy does not necessarily wipe out all debt

Although bankruptcy does help people get a fresh financial start in many circumstances, it is not a cure-all, and it does not cover some debts. Unpaid child support, for example, is not wiped out when you file for bankruptcy, nor is back alimony or certain types of tax debts.

3. Bankruptcy can bring relief

Although a common belief is that filing for bankruptcy destroys a person's financial future, the truth is that often bankruptcy is the first positive decision that a person in overwhelming debt can make. Filing for bankruptcy is acknowledging a problem that has gotten out of hand and taking a proactive step to solving the problem. Rather than letting a credit score continue to decline as unpaid bills mount, bankruptcy can stop creditors from harassing a person and allow him or her a chance to begin rebuilding his or her finances. A bankruptcy attorney can help clients decide if this is the right option as well as which type of filing is most suitable.

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