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Determining when bankruptcy is needed

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As many Ohio residents know, trying to provide for loved ones while trying to pay off debt may be difficult if one's financial status is undermined by unemployment or other factors. Deciding if bankruptcy is a way to overcome such a downturn may depend on specific situations.

An unemployed individual may not be able to stay current with financial obligations, particularly if it they are considerable. The longer unemployment persists, the more likely debtors may use up reserves. Fling for bankruptcy may allow the debtor to handle his or her current situation while looking for future employment.

Some debtors have significant credit card debt and, despite an income, may only be able to pay the minimum amount due. The debtor may be using credit to pay for needed living expenses. In this case, personal bankruptcy may be advisable. Medical debt continues to be a problem, even with health insurance, as deductibles and co-pays quickly mount up. Bankruptcy in such cases may eliminate debt accrued prior to filing.

Senior citizens are in a unique position. The majority are living on retirement income. Qualifying for bankruptcy is not hampered by Social Security income since such benefits are not considered income. Likewise, 401(k) and other tax-exempt accounts may not count either. It is important to check if one's home is protected in part under a homestead exemption. In cases such as these, it may be beneficial to speak to an attorney concerning eligibility for bankruptcy. There are different requirements for both Chapter 7 and Chapter 13 that the attorney will explain while determining if other debt relief alternatives are available.

Source: GO Banking Rates, "5 Signs It's Time to File for Bankruptcy", Morgan Quinn, Feb. 18, 2015

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