Have unforeseen circumstances such as divorce, job loss, or illness ever left you financially crippled? Perhaps you’ve used your credit cards too frequently and frivolously in the past and now face an overwhelming amount of debt that you can’t recover from. In addition to your debt problems, you may also be experiencing harassment from creditors and collection agencies constantly demanding payment from you. It used to be that if you couldn’t pay your bills, there wasn’t much you could do but face prison time for it. Luckily, though, things have changed and laws have been enacted to give honest people faced with overwhelming financial pressure a chance to start over. This chance is known as bankruptcy and your right to file for it is governed by federal law. Bankruptcy basically involves petitioning a court to forgive or reduce your debts. Individuals, married couples, partnerships, and even corporations can all ask for debt forgiveness through bankruptcy. Filing bankruptcy will usually stop all collection efforts and give you time to resolve your debt problems with your creditors. There are several ways in which you can resolve your debt problems and each are outlined in separate chapters of our bankruptcy law. Your circumstances will generally dictate which chapter of bankruptcy is best for you. Generally, if you’re completely broke and don’t have sufficient income to pay any of your bills, a Chapter 7 bankruptcy may be a suitable choice because it can eliminate some or all of your debts, leaving you the ability to completely start over financially. Conversely, if you have a steady income and just need more time to pay your bills, a Chapter 11 or 13 can help you restructure your bills to a more manageable level. Keep in mind that you can’t just declare bankruptcy. The court must declare you bankrupt before your debts can be forgiven or reduced. You should also remember that as beneficial as bankruptcy can be, there are as many negative as positive consequences to filing. Mainly, it can damage your credit for up to 10 years, affect your purchasing power in the future, and possibly result in the loss of valuable property. With these things in mind, bankruptcy sometimes may not be the appropriate path to take during financial hardship. Other times, it may be the only viable option during a desperate period in your life. Either way, the decision to file bankruptcy should always be made with your careful consideration and an utmost understanding of both its benefits and ramifications.
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