What is bankruptcy?

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If you owe more than you can repay, you may have the option of declaring bankruptcy. Bankruptcy is a legal process that involves seeking the help of the U.S. Federal Court to release or “discharge” some of your debts and get a fresh start financially. In recent years, bankruptcy filings have reached an all-time high. Bankruptcy is a serious matter that can have significant, long-lasting consequences. While it may be an option, it’s not an easy way out. Bankruptcy law is complicated and changing. It’s essential to get professional counseling about your options. Depending on your personal financial situation and the federal and state laws that apply, declaring bankruptcy may eliminate some of your debts or allow you to repay just a portion of each debt you owe. The court may allow you to keep some of your assets in the process. Bankruptcy usually does not erase child support, alimony, fines, some taxes, and most student loan obligations. If you file, you will have legal and court costs.
Before considering the option of bankruptcy: Talk to your creditors to see if they’ll agree to extend your payment schedule, allow you to skip a payment, or some other reasonable repayment alternative. Discuss any possible solutions. Consult with a qualified credit or debt counselor.
For a detailed explanation of bankruptcy, the impact it could have on your financial picture, and steps to take before considering bankruptcy, click on Library.
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