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Determining the right time to file for Chapter 7 bankruptcy

As most New Yorkers know, debts are neither inherently good nor inherently bad. If they pay bills on time and pay off credit cards each month, then debtors can avoid acquiring debts that are difficult to pay off. Failure to pay on time, however, not only results in higher interest rates but also leads to creditor harassment from third-party collectors who dog the debtor to pay his or her debts.

For many people facing overwhelming debt, bankruptcy is their last resort, although many hesitate to file for such protection as Chapter 7. Most debtors think filing for bankruptcy is humiliating for someone who should have handled his or her finances well. They also think they will lose everything if they file, including employment opportunities and their ability to purchase a car or home.

New Yorkers struggling with debt should understand, however, that filing for bankruptcy is often the best way to settle their debts. Unlike bankruptcy, credit counseling agencies that promise fresh starts are not supervised by the federal court.

Debtors who seek debt relief usually need the answer to one urgent question: When is the right time to file for bankruptcy such as Chapter 7? Generally, it is when the debtor’s income is not enough to support his or her daily expenses and pay off the debts, when credit counseling reveals to the debtor the true level and extent of debt he or she is dealing with or when counselors suggest bankruptcy as the best way to settle the debts acquired.

Bankruptcy is often the best solution once it’s determined that all other options will not work. Under Chapter 7 bankruptcy protection, some, but not all, property and assets are liquidated. To understand what the exemptions are for asset liquidation during bankruptcy, a debtor should speak with a qualified and experienced bankruptcy legal professional.

Source:, “How to know when bankruptcy is your best option,” Katherine Muniz, Jan. 26, 2014

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