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Bankruptcy can help to regain financial stability

Washington consumers who are overwhelmed by debt might be exploring the options to get back on track. Many people will try all kinds of quick-fixes rather than filing for bankruptcy. However, most of those only cause further spiraling into debt, while bankruptcy can be a remedy. Gaining knowledge about the two options -- Chapter 7 and Chapter 13 -- may be the first step to regaining financial stability.

Individuals who do not own a home and have limited incomes typically find Chapter 7 bankruptcy to be the suitable option. If the court approves such a filing, unsecured debts such as credit cards and medical debt can be wiped out within months. However, the court will have the right to sell some of the consumer's property to cover debts, but certain personal items are typically exempted from liquidation.

Chapter 13 bankruptcy allows a consumer to reorganize his or her debts by agreeing to continue paying off debts over an extended period of between three and five years -- according to a court-approved payment plan. This option will keep the consumer's assets safe from creditors and liquidation -- as long as agreed-on payments are maintained. At the end of the reorganization period, remaining unsecured debt balances might be discharged by the court.

One of the most stressful aspects of facing mountains of debts is the continuous harassment by debt collectors and creditors, and one of the most significant benefits of filing for bankruptcy is the fact that such harassment ends immediately upon filing. From that moment on, an automatic stay is in place, and creditors must deal with the bankruptcy attorney. An experienced Washington bankruptcy lawyer can explain the other pros and cons of each option, which will allow the consumer to make an informed choice about the way forward.

Source: experian.com, "Bankruptcy: Chapter 7 vs. Chapter 13", Carla Fried, March 28, 2018

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