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Do different types of debt call for different bankruptcy options?

As a law firm that focuses on bankruptcy law, we know there are a variety of tools that can help individuals struggling with debt management. Before we help an individual prepare for a Chapter 7 or 13 filing, there are key areas we inquire about.

The first step in our approach is gaining an understanding of the type of debt that is causing hardship. If the matter involves a tax problem, there may be administrative solutions or ways to work with the IRS that can result in a favorable outcome. For example, an offer in compromise might provide the breathing room to keep an individual’s finances above float. 

Our counseling also educates individuals about common bankruptcy misunderstandings. For example, only certain tax debts are eligible to be eliminated in a Chapter 7 filing. That reality means that one might need to look at other repayment options. If a tax debt cannot be reduced through administrative negotiations with the IRS, a Chapter 13 might provide a more manageable repayment plan. 

Yet even a Chapter 13 might result in the elimination of some obligations. For example, the reorganization and consolidation under this filing might result in the elimination of a second or third home mortgage. Certain options are also available to owners of a multiple family home or non-owner occupied property, possibly allowing them to reduce those mortgages down to the home’s value. It may even be possible to pay off a mortgage in 5 years under a Chapter 13. Car loan payments may also be modified with a Chapter 13.

Of course, an individual’s unique circumstances might call for a different approach. Someone who has staggering credit card debts without substantial real property or other assets might benefit more from a Chapter 7 liquidation.

Source: FindLaw, “Bankruptcy: Changes in the Law Under BAPCPA,” copyright 2015, Thomson Reuters

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  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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Goldman & Beslow, LLC

Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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