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Bankruptcy reform hitting some people harder than others

Bankruptcy is often a person's last chance at settling or clearing away debt and resuming a normal life that isn't haunted by the belligerent calls of creditors demanding money that debtors simply don't have. However, when bankruptcy reform passed, it created a serious road bump for individuals who need help the most. Many people in Washington and across the nation are now facing a troubling dilemma -- they are actually too poor to even file for the bankruptcy protection that they need.

This realization came to light after a study was published in Jan. 2015. According to the data that was analyzed, once bankruptcy reform was passed back in 2005, bankruptcy filings began to decrease, but foreclosures shot up. Insolvency also increased accordingly.

The increased cost of bankruptcy put those dealing with insolvency in an especially difficult spot. Unable to even begin the process of seeking protection from a Chapter 7, most people have no way of ending the seemingly infinite stream of calls from creditors, many of which are often harassing. Chapter 7 bankruptcy can even halt foreclosures or wage garnishment, another benefit that insolvent individuals have little to no hope of handling if they are unable to file for bankruptcy. 

While bankruptcy reform may appear to have created a hopeless situation for many Washington residents dealing with an overwhelming amount of personal debt, solutions may still be sought out. A careful evaluation of a person's financial status and his or her debts may reveal that there are still avenues that can lead to a successful bankruptcy. In some instances, a person may not qualify for a Chapter 7 bankruptcy, but instead might be eligible for the protection that a Chapter 13 filing can offer.

Source: nasdaq.com, "Study: Law creates many too broke to file for bankruptcy", Feb. 24, 2015

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