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Bankruptcy for debt relief

Debt has become a serious problem for many people in Kentucky. Those looking for debt relief options are often bombarded with advertisements from many companies and organizations promising what appears to be simple and fast solutions. The catch is that most of these solutions involve a form of bankruptcy. While bankruptcy is and should be considered a tool for dealing with debt, there are important laws and consequences to consider.

People who are looking to manage their debt may first want to consider debt relief solutions that do not involve bankruptcy. This involves contacting creditors to try and reach an agreement about the debt. While creditors are not required to provide borrowers with payment options, they have plenty of reasons to do so. It may also be a good idea to work with a debt counseling service, and bankruptcy laws require that a person receive such counseling as part of the process.

If bankruptcy is the only option, then understanding the consequences is important. A bankruptcy will stop foreclosures, garnishments and other collection practices, but it will also harm credit. It remains on a credit report for 10 years, so it can be a long-term hindrance to any future attempt to obtain a loan. The two main forms of personal bankruptcy are Chapter 7 and Chapter 13, and there are different eligibility requirements for each.

When people are considering their debt relief solutions, an attorney can be very helpful in recommending a variety of debt counseling services and allowing clients to explore their options. The attorney can also work with creditors on the client's behalf to reach an agreement without bankruptcy.

Source: FTC, "Debt relief or bankruptcy?", December 17, 2014

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