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Choice not to file for bankruptcy can lead to garnishment, liens

When an individual finds himself facing financial challenges due to a struggling economy, medical expenses, credit card debt, or other unexpected life changes, he may be stressed about how he is going to get out of his financial dilemma. Many who are in these situations consider bankruptcy, but may feel scared about going through the process. Fortunately, the process does not have to be frightening and the results of filing for bankruptcy may be better than choosing to forego bankruptcy.

If an individual decides to forego bankruptcy and attempt to get current on debt but fails, the results can be disastrous and long-lasting. When one falls behind on bills, creditors may sue. If the creditors win, then they may have the legal authority to garnish wages and put liens on property including the debtor's home. To avoid these judgments, those who are in overwhelming debt should seriously consider their bankruptcy options.

The two most common types of personal bankruptcy are Chapter 7 and Chapter 13. Under Chapter 7, also known as liquidation, the debtor's non-exempt assets are sold to pay creditors. Some property may be kept through this process if it fits into certain exemptions. Once the debtor's assets are sold, debt may be discharged, thus preventing creditors from taking collection actions.

Chapter 13 bankruptcy allows a debtor to keep his property and restructures his debt to make payments more manageable. This restructuring operates similar to a consolidation loan, allowing the debtor to repay debt over a period of time.

No matter which route an individual chooses to take, a bankruptcy attorney may be able to help him achieve debt relief. Whether one chooses to eliminate debt or restructure it, a bankruptcy plan can help the individual get back on his feet and find a new financial start. The idea of bankruptcy may seem scary, but it can lift the weight of debt burden off an individual's shoulders, and therefore should be seriously considered by those who are unable to pay their debts.

Source: CNBC, "The good thing about bankruptcy," Sakina Spruell, Oct. 21, 2013

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