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What can you do if you have overwhelming debt?

These days many Florida residents are facing the consequences of having accumulated overwhelming debts, such as credit card debt, mortgages and car loans. There can be many reasons for these financial hardships including job losses, medical expenses and the housing market crash that has hit Florida particularly hard.

Though many different options are available in order to help people get out from under overwhelming debt, there are two forms of personal bankruptcy that are very popular options.

One of these is filing for Chapter 13 bankruptcy protection. This form of bankruptcy is most appropriate for those individuals who have significant property that they do not want to lose. These individuals also typically have a regular income, but are having trouble making end meet because they are carrying so much debt.

In such a scenario, Chapter 13 will allow them to keep some of their property if they can negotiate a court-approved repayment plan for a three to five year period, so that they can catch up with their debt obligations.

For others, either those who have little property or so much debt that they cannot pay off their obligations under a repayment plan, then Chapter 7 may be the right route. Under Chapter 7, an individual's assets are liquidated in order to pay off creditors. One benefit of Chapter 7 is that most unsecured debt will get discharged.

In either case, property can be protected from unsecured creditors by filing for protection under bankruptcy laws. Once a bankruptcy petition has been filed, creditors must stop harassing you during the bankruptcy process and even after the debts are discharged. This means that creditors will not be allowed to garnish your wages or foreclose on your home while you are under the protection of a bankruptcy trustee.

It is important to note that d etermining which form of bankruptcy or debt relief is most appropriate will depend upon the circumstances of each individual's case.

Source: Chicago Tribune, "The pros and cons of bankruptcy," Elliot Raphaelson, July 17, 2012

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