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Should you consider bankruptcy to eliminate debt?

| Aug 20, 2020 | Bankruptcy

When you were assigned to your new role at work, you were thrilled. You had a major raise, and you were earning thousands of dollars a month doing a job you loved. Over the next few months, you racked up significant debt as you began spending to match your income. You had every intention of paying back the loans you took out, but you wanted your life to reflect your income sooner rather than later.

Unfortunately, that job didn’t last as long as you expected. When the economy took a downturn, the company began eliminating roles. Yours was one of the first to go. That means that you’re left with significant debt and no income to pay it back.

Should you consider going through bankruptcy?

A situation like yours isn’t uncommon. Many people spend money believing that their work will continue, only to be caught off-guard when they suddenly lose their jobs or have an emergency to deal with. A bankruptcy shouldn’t necessarily be your first choice, but if you have no income and can’t pay back what you owe, it may be the right option moving forward.

With a Chapter 7 bankruptcy, the court will ask that you liquidate any assets that are not exempt in order to pay back your debts. You will need credit counseling and may need support negotiating a fair solution with creditors.

If you are able to find a job and have some income coming in, then it’s possible you could file for a different form of bankruptcy, Chapter 13. This form allows you to pay back a portion of what you owe over three to five years, eventually having the remaining qualified debts discharged.

Before you choose bankruptcy, consider other options

Prior to choosing bankruptcy, your attorney can talk to you about other options like debt-reduction programs, repayment plans and negotiating with your creditors. If those options won’t work for you, then your attorney can give you more information about the kinds of bankruptcy you may want to try and how they will affect you in the future. You should take some time to educate yourself on bankruptcy before you decide to move forward.

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