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Bankruptcy exemptions may makes bankruptcy easier

When debt becomes overwhelming, life can become extremely difficult. If unforeseen expenses must suddenly be met, even the best financial plan can fall apart. Any Wisconsin resident who finds it hard to stay current with his or her bills and other financial obligations and sees no other options should consider filing for bankruptcy in order to get from under the burden.

The most common consumer bankruptcies are called Chapter 7 and Chapter 13. Under Chapter 7, a debtor sells properties not covered by the bankruptcy proceedings in order to pay off debt with the help of a court-appointed trustee. Depending on the bankruptcy exemptions that apply to the case, the debtor often will be able keep some of his or her personal and real properties, which can make getting a fresh start following bankruptcy a little bit easier.

Under Chapter 13, a court allows the debtor to keep his or her properties as long as there is a court-approved payment plan and a good source of continuous income. The court will assign a trustee to ensure that the debtor complies with the repayment agreement.

Not all debts can be discharged completely by bankruptcy. A bankruptcy petition does not discharge child and spousal support, personal injury settlements, student loans, court and criminal restitution, court fines and most federal and state taxes. If a petitioner acquires additional debt after filing for bankruptcy, that debt is also exempted and may not be included in the bankruptcy.

By reaffirming some debts, a debtor can pay them off without having those debts added to the bankruptcy petition. Reaffirmation is another mechanism that allows the debtor to keep certain items that would otherwise be liquidated or sacrificed in the bankruptcy process.

A fresh financial start requires a plan. Although a person's credit score will take a hit, filing for bankruptcy is ideal if repaying debt is virtually impossible. Before filing, it is important to get sound financial advice, because there is no single debt-relief option that works in all cases.

Source: CBS Seattle, "Personal Bankruptcy, The Basics," Jan. 6, 2013

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