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What Wisconsin residents should know about filing for bankruptcy

Wisconsin residents who feel as if they cannot breathe because they are stuck under a pile of debt they cannot repay should take note that a remedy may be close at hand. Although many people decline to even think of filing for bankruptcy because it might damage their credit scores, the reality is that bankruptcy is a very responsible way to start rebuilding a better credit score.

All that being said, anyone with overwhelming debt should first consider the following before filing for bankruptcy. Check with a credit counselor. This professional can assess a person's finances and walk through several bankruptcy options. If a counselor determines that a person's current financial situation makes him or her a candidate for bankruptcy as debt relief, then it may be a good solution.

Weigh other options for paying down debt. Bankruptcy may be ideal if options such as taking out a secured loan or negotiated debt settlement are not feasible or are unwise. For instance, taking out another line of credit may require collateral such as a house. If the loan is unpaid, however, the debtor can lose that collateral.

Assess solvency. A person is considered insolvent if his or her debt liabilities exceed the fair market value of his or her assets. Once again, bankruptcy may be the best option if a debtor's income and assets are not enough to off debts.

If collection calls and notices have become aggressive and are negatively affecting daily life, then consider bankruptcy to find some peace of mind.

Whether filing under Chapter 7 (liquidation to repay debts) or Chapter 13 (structured repayments for a specified period of time), bankruptcy is not the answer for all unpaid liabilities because certain bankruptcy exemptions cannot be discharged this way. Consulting a professional for advice is the best way to ensure that bankruptcy is the best solution.

Source: Daily Finance, "How to Know When Bankruptcy Is Your Best Option," Katherine Muniz, Jan. 26, 2014

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