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Bankruptcy 101


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Bankruptcy is a legal process, based on federal laws, which may allow you to discharge much of your debt or give you time to repay your debt without creditor interference. For many people with a health condtion, bankruptcy provides a second financial chance - a chance to push the reset button

Filing bankruptcy can be the right decision if you are so overburdened with debt that all your income is going to pay debt-- particularly when medical expenses are a primary cause for the situation. Half of all personal bankruptcies in the U.S. are due to medical debt. As one person who went through bankruptcy put it: "Afterward, it was as though a big weight had been lifted off my shoulders. Now I can move forward instead of being stuck."

It is more difficult to file bankruptcy than it used to be. However, bankruptcy may still be a useful alternative if you need it.

Before filing for bankruptcy, make sure to look at all the alternatives and consequences. For example, one consequence is that it will be difficult to get credit for a batch of years after bankruptcy. For information which can help make the decision about whether to file for bankruptcy, click here.

If you do proceed, a good understanding of the process, and an experienced lawyer who is sympathetic to what it's like for people to go through bankruptcy, will make it a lot easier. For information, click here.

There are three types of Bankruptcy used by individuals: Chapter 7, Chapter 11 and Chapter 13. In other articles we help you understand Chapters 7 and 13, the Chapters usually used by individuals. Chapter 11 is reorganization used by people with high net worth who are looking to reorganize their financial lives the way that companies such as airlines reorganize.  (For a sample letter to send to creditors, click here.)

For information about what happens after bankruptcy, click here.

To learn how to find an attorney who specializes in bankruptcy, click here.

NOTE: An employer can discriminate against a prospective employee who has gone through bankruptcy. However, an employer cannot discriminate against an existing employee because of the employee's bankruptcy. If you are applying for a job, be prepared to discuss your bankruptcy. A good time to do that is when an employer asks you to sign a form permitting a credit check. If the bankruptcy was primarily due to medical costs, the explanation may have to involve disclosing that there was a health condition. If that is the case, be sure to follow it up with a statement such as: "You should be aware that I do not have a health condition which would affect my ability to do the essential functions of the job under discussion."

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