Your Personal Fiscal Cliff

While Congress and President Obama fight to resolve the fiscal cliff problem, millions of American families are wrestling with their own financial troubles. Fortunately, individuals have a financial restructuring tool that is not available to our nation’s leaders: bankruptcy.

Under the federal bankruptcy laws, an individual or married couple can petition to have debts discharged, reduced, or restructured. A Chapter 7 bankruptcy will discharge un-payable debts and provide a fresh financial start in four to six months. Chapter 7 is generally used when the debtor has a modest income and extensive unsecured debts, like medical bills or credit cards. Some debts are identified in the Bankruptcy Code as “non-dischargeable” and survive a Chapter 7 bankruptcy, like recent tax debts and student loans.

Chapter 13 is a repayment plan bankruptcy. The debtor repays secured debts over three to five years, and unsecured debts are paid according to the debtor’s financial ability. Unsecured debts that are not repaid during the course of the bankruptcy are generally discharged. Through a Chapter 13 the debtor can cure mortgage arrears or overdue car payments. Under certain circumstances, the bankruptcy court can reduce the amount that is owed on a car or strip away a junior lien on a house. Consequently, Chapter 13 is often used when the debtor has a significant regular income and wants to keep secured property. In the majority of Chapter 13 cases the debtor pays for the items he wants to keep, pays any “priority” debts, like taxes or past-due child support, and discharges all other unsecured debts.

Bankruptcy is a powerful financial tool that is available to restructure your finances. During your bankruptcy case creditors are prohibited by federal law from contacting or harassing you; attempting to collect on a debt from you (and often from any co-debtor); and cannot take legal action against you like filing or continuing a lawsuit or garnishing wages – including the government for a federal debt. Bankruptcy may be the answer to your financial problem! Contact an experienced bankruptcy attorney today and learn how the federal and state laws can help you and yourfamily.

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