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Facing a creditor lawsuit? Bankruptcy may be the answer

It doesn't take much to push you into debt. Many people start out their professional careers already carrying substantial student loan debt. From there, you add credit card debt, a mortgage and maybe a financed vehicle. You're only one serious illness or accident away from being in financial trouble. Any situation that could result in missed work and lost wages could make you unable to make your monthly minimum payment. When that happens, you could quickly find yourself on the receiving end of a lawsuit from one of your creditors. You only have a few options.

You can respond to the lawsuit itself, but courts almost universally side with creditors when borrowers miss payments. Going to court could incur court costs and result in your wages being garnished. Without access to your full paycheck, you could find yourself falling behind to other creditors as well, resulting in another lawsuit. Depending on your circumstances, you may want to consider bankruptcy when you are served with lawsuit paperwork from a creditor. Bankruptcy puts an immediate stop to all collection activities, which include lawsuits and those unending creditor calls on your cellphone.

Bankruptcy can offer a path out of debt

There are two kinds of bankruptcy available to individuals and married couples, Chapter 7 and Chapter 13. Most people who file bankruptcy will go through Chapter 7 proceedings, which allows for liquidation and effective forgiveness of debts. There are limits to your income if you want to file Chapter 7 bankruptcy, and you can only retain $10,000 in personal property and up to $75,000 of home equity from liquidation. Any other assets will be sold to help repay creditors, if possible. All your dischargeable debts get discharged when you file Chapter 7 bankruptcy.

Chapter 13 bankruptcy, on the other hand, does not have an income requirement. Chapter 13 bankruptcy allows the person filing to "restructure" the debt into more management monthly payment. You are still required to pay on the debt, but the courts help ensure your repayment plan is fair to all involved. Chapter 13 is beneficial for those with significant assets, as those filing for Chapter 13 bankruptcy do not need to have any assets liquidated to repay creditors.

Bankruptcy is simpler with an attorney

Although some people attempt to struggle through bankruptcy without a lawyer, doing so is quite difficult. Your bankruptcy attorney can help ensure you are filing the right kind of bankruptcy and meeting all paperwork deadlines and legal requirements. Working with a lawyer can make the entire, stressful process of bankruptcy simpler and more streamlined. Your attorney can help ensure that you're getting a real financial fresh start.

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