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What bankruptcy can -- and can't -- do for people

While most of us would prefer not to think about it, the reality is that our lives can change dramatically in the span of a few minutes or even a few seconds. Indeed, you might be diagnosed with a serious illness during an otherwise routine exam, you might be served with divorce papers while walking to your car or you might go to work one day to find your belongings boxed and a pink slip on your desk.

As obviously distressing as these scenarios can be on a personal level, they can also wreck havoc on a financial level, rapidly depleting your bank account and leaving you wondering what you can do when the debt collectors won't stop calling.

As we discussed before, those who find themselves facing insurmountable debt and an uncertain monetary future, should strongly consider the fresh financial start offered by personal bankruptcy.

While it's true that personal bankruptcy can provide a much-needed lifeline, it's important for people to understand that the process is not without its limits and that some of the things they've heard about it through family, friends and the media -- both good and bad -- might not be entirely accurate.

In light of this reality, here are just a few of the things that filing for bankruptcy can accomplish:

  • Discharge (i.e., eliminate) the legal obligation to pay the majority of debts
  • Stop harassment by debt collectors
  • Stop wage garnishment and other collection-related activities
  • Stop foreclosure
  • Stop repossession of cars and other property
  • Restore utilities or prevent them from being shut off

On the flip side, here are just a few of the things that filing for bankruptcy can't accomplish:

  • Discharge those debts given special treatment under the law, including the majority of student loans, tax debts, criminal fines, restitution orders, spousal support and child support
  • Discharge post-bankruptcy debts
  • Relieve co-signers of their obligation to cover either a portion or the entirety of a loan

If you have any questions after reading the forgoing, you should strongly consider speaking with an experienced legal professional who can provide answers, and help you determine whether Chapter 7 or Chapter 13 bankruptcy might be a viable option.

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