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Bankruptcy Pitfalls

If all other avenues of relief fail, you may find yourself forced into bankruptcy. Bankruptcy is a LAST RESORT, not an easy solution.

If you declare bankruptcy, it becomes a matter of public record. Creditors will place it on your credit report as part of your credit history. It will be extremely difficult for you to obtain credit for 7-10 years, depending on the type of bankruptcy you declare.

Chapter 7 allows you to totally wipe off the majority of your debts. You also lose many of your assets, except for a small portion protected by law. Some debts can not be eliminated by Chapter 7 such as child support, alimony, mortgage debt, student loans guaranteed by the government and income taxes for the previous 3 years. This type of bankruptcy remains on your credit record for 10 years.

Chapter 13 allows you to restructure your debts by establishing a schedule to pay them off over time. You get to keep your assets and your creditors agree not to take any further action, as long as you keep to the payment schedule. This type of bankruptcy remains on your credit record for 10 years.

The courts and your creditors may also contest your bankruptcy petition and scrutinize your debts and assets, especially if they suspect fraud.

In addition, many employers request a credit report as part of your job application. A prior bankruptcy may effect your getting that job.

And because your financial condition becomes public knowledge, local newspapers most often carry listings of bankruptcies which could cause an embarrassing situation for you among friends, neighbors, and relatives.

For all these reasons, bankruptcy should be considered ONLY when all other avenues of relief fail.

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