For those struggling with debt, bankruptcy may be best option

For those struggling with debt, bankruptcy may be best option

Arizona residents should not think of bankruptcy as a defeat or an admission of failure. Rather, it should be thought of in more accurate terms -- as the best option one sometimes has when facing insurmountable debt and endlessly increasing interest rates. Bankruptcy, rather than marking a low point in one's life, is actually more of a turning point, a chance at a new beginning and a shot at a life free from endless debt and creditor harassment.

Financial guru Suze Orman believes bankruptcy is the superior alternative to making repeated attempts at climbing out of debt while ignoring the obvious harm it is doing. For someone who truly lacks the money to pay bills, Orman says, it is far more sound to tackle the problem by declaring bankruptcy, thereby affording oneself the chance to start anew, than to remain in debt and give the creditor an opportunity to garnish wages by suing.

The types of personal bankruptcy most often filed are Chapter 7 and Chapter 13. Chapter 7 is best thought of as the form of bankruptcy that allows debtors to rid themselves of most of their debt by liquidation of their properties. Chapter 13, on the other hand, does not require the debtor to liquidate property in the same way, but instead allows the debtor to pay back creditors gradually with a repayment plan. There are many distinctions between the two -- like, for instance, Chapter 7 being more difficult to qualify for -- that are sometimes subtle.

Because of these distinctions and subtleties, Arizona residents struggling with debt may wish to seek out an attorney to help make sense of the differences between Chapter 7 and Chapter 13, and decide on a bankruptcy plan that is best suited for each individual situation.

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

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