Bankruptcy can lead to solvency

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Bankruptcy! For some it means the end of the world. For others it is a bright light at the end of a long, dark tunnel. Declaring bankruptcy may be an unpleasant thought, even abhorrent, but for many people right now it could be the best option.

How do you know whether to make that choice? How long should you wait before things get so bad that your mental and physical health begins to suffer as a result of crushing debt? When should you just throw down the gauntlet, along with most of your debts, and ask the courts for a fresh financial start?

According to the Administrative Office of the U.S. Courts, more than a million people filed for personal bankruptcy during the past 12 months, a staggering 30 percent increase over the period a year earlier. However, this statistic is not a true picture. It does not include those thousands more who are “unofficially bankrupt” and reluctant to file.

Reluctance stems from the word itself. Historically, the word carried much shame and stigma. However, for most people, it’s the right thing to do. Failure can sting the average consumer. Failure and bad credit are, understandably, deterrents to a bankruptcy filing. But those intense fears can prevent consumers from taking advantage of the financial protection offered by bankruptcy, which may allow you to erase most of your consumer debt while preserving assets like your retirement accounts and sometimes even your home and car. Instead, many people delay filing until they are truly desperate–a HUGE mistake.

Does this sound familiar? Creditor calls from 8 a.m. until 10 p.m., nasty creditor letters, your heart thumps every time there is a knock on the door, and you have lost the use of your phone. Many of my clients have seriously struggled for more than two years. Two or more years of their lives have been sacrificed in order to delay the inevitable. You need to make the decision earlier before emptying your retirement accounts or losing your car to repossession.

Because bankruptcy can be complex, and because bankruptcy laws underwent a major overhaul in 2005, many people are not only wary of filing but also confused about their options and what the possible outcomes are. One common misunderstanding is that declaring bankruptcy will ruin your credit. If you’re at the point of even considering bankruptcy, it’s likely that your credit is in tatters anyway. In fact, in most cases, your credit could emerge in better shape once you’ve dealt with your debts.

Another myth is that you must be at the frayed end of your financial rope before you file. You won’t lose everything in a bankruptcy because some assets are protected, and you will need those to move forward. Waiting until your resources are entirely depleted defeats an important purpose of bankruptcy, which is to help rebuild your life.

Knowing whether to file, when to file and whether to do so under Chapter 7 or Chapter 13 of the bankruptcy code is a decision best made with the help of a lawyer. Before allowing crushing debt to begin taking its toll on your health, get past the fear and get a fresh financial start. Talk with a lawyer about bankruptcy.

Jack Pritt has been an attorney in Maricopa for two years. His office is located at 20987 N. John Wayne Pkwy, Ste. B140. To contact him, go to www.prittlawarizona.com .

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