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Bankruptcy basics: The pros and cons

It's common to see financial stability and financial independence as virtues. Meanwhile, it's equally common to see debt problems, being short on cash and having trouble paying for life necessities as points of embarrassment.

The truth is, most Americans are carrying thousands of dollars of card debt due to moments when they were short on cash. However, people tend to showcase an image of financial stability while hiding any signs of money problems. Long story short, if you are having debt problems, you're not alone and it's nothing to be ashamed of.

Bankruptcy can help you be financially secure again

Society often views bankruptcy as a "the low point" in terms of financial success. However, there is nothing further from the truth. Bankruptcy is actually "the turning point" that can miraculously put you back on sound financial footing again. It is better to view bankruptcy as a bridge that makes financial security available to people in otherwise hopeless debt circumstances.

Here are some of the benefits of bankruptcy:

  • In many cases, debtors can do away with old tax liabilities that are three years or older.
  • Bankruptcy will stop your problems with missed payments, loans in default, the threat of repossession and lawsuits seeking to recoup unpaid debts.
  • It's easier to explain a bankruptcy to a future creditor than to explain a problem with unpaid and overdue loans obligations.
  • Although bankruptcy can't make most student loans disappear, you can make other debts disappear which could serve to free up extra capital to pay off your student loans
  • Bankruptcy can help you prevent aggressive collection attempts by other lenders.
  • Bankruptcy is less embarrassing than harassing and embarrassing telephone calls from debt collectors.
  • Filing bankruptcy is a public event, and others will know about it. However, if a bank sues you to collect a debt, those records will also be publicly available and this could be even more shaming or embarrassing.
  • You'll be able to keep most possessions in Chapter 7 liquidation proceedings because New Jersey state law provides for many exemptions.

Are you ready to consider bankruptcy?

Bankruptcy is not for everyone. Some New Jersey residents suffering from debt problems can resolve their debt issues in a faster and more practical way than bankruptcy, whereas others can be greatly aided by the process. The more you know about the potential benefits and disadvantages of bankruptcy, the better equipped you'll be in evaluating your options in this regard.

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Cohn Lifland Pearlman Herrmann & Knopf LLP
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