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How bankruptcy might benefit you

Florida residents with significant debt may wonder about ways to get relief. Many people believe that there is a social stigma associated with filing for bankruptcy. However, financial expert Suze Orman says bankruptcy is often a better choice than the alternative options.

In recent years, personal bankruptcy filings have been on the rise, with 1.1 million filings in 2008, which is more than 30 percent more than in the prior year. In 2012, that number jumped to 1.3 million.

The most common types of bankruptcy are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy discharges most debts and sells most of the consumer's assets. The consumer may be able to keep some exempt assets, and creditors may not sue to collect discharged debts. A Chapter 13 bankruptcy is similar to a consolidation loan. It allows the consumer to keep certain assets and make payments toward debts over three or five years. The plan often calls for the consumer to continue to make mortgage payments.

The alternative to filing for bankruptcy for many people is that creditors can sue them. That means that the creditor may have the ability to put a lien on the person's home or garnish wages. Either of those outcomes may be worse than filing for bankruptcy to get a clean slate. Orman says that it is often better to take the legal route to eliminate debts, so creditors know that you cannot pay and will not be able to take these steps to collect.

When consumers find themselves struggling to pay debts, a local bankruptcy attorney may be able to advise on whether bankruptcy is the best means of relief. An attorney may also be able to help file documents and guide consumers through the process.

Source: CNBC, "The good thing about bankruptcy", Sakina Spruell, October 21, 2013

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