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Governor Romney encourages supporter to file bankruptcy

While on the campaign trial in another state, former Massachusetts governor and Republican presidential nominee, Mitt Romney, urged one of his now supporters to file bankruptcy.

The businessman met Romney in January. He explained to Romney how he was struggling with debt following the failure of both his title insurance business and several investment properties in the wake of the housing market's collapse. While the man did not want to walk away from his debts, Romney implied that a fresh financial start might be in his best interest. While the man is still planning his exact course of action, the man appears to be a good candidate for a Chapter 7 bankruptcy.

A Chapter 7 bankruptcy, informally called a "straight bankruptcy," allows eligible debtors to walk away from their personal and business debts, so long as the debtors follow the bankruptcy laws. While Chapter 7 debtors may, in some situations, have to turn over some of their property, the debtors will not have to participate in a long-term repayment plan in order to get a fresh financial start.

Chapter 7 may be particularly useful for this man because many of his lenders, probably banks that hold mortgages on his homes, refused to offer him an affordable compromise when he reported his financial stress to them. While he may have to surrender his properties to the banks -- which he seems willing enough to do -- the bank will not be able to pursue him for the difference if the bank cannot sell the property for the entire balance remaining on the bank's loan.

People who file Chapter 7 bankruptcies come from widely varying financial situations. While many are typical wage earners who get overwhelmed by credit card debt or medical bills, a Chapter 7 may also be best for a person like the man is the story, who has substantial business investments.

Source: The Huffington Post, "Mitt Romney supporter may soon file for bankruptcy, per Romney's advice," Arthur Delaney, Aug. 29, 2012

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