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The importance of understanding the personal bankruptcy process

The story of an immigrant family who tried to live out the American dream by starting a new business serves as an important reminder for Massachusetts residents who are contemplating trying their own hands at a new business idea. It also serves as a good reminder of how bankruptcy can help individuals with overwhelming debt.

This family, which was not familiar with the relatively lenient bankruptcy system of the United States, chose to mortgage their home when their business began to fail. The extra cash that the family drew from the home did not save the business, and the family wound up with insurmountable debt on account of its failing business.

Because the family had mortgaged their home, however, they could not stop foreclosure and wound up renting out a basement apartment for a number of months in order to avoid homelessness. The family ultimately chose to go through a personal bankruptcy in order to get relief from their business debt. They soon learned that they need not have mortgaged their home. Promptly filing for bankruptcy may have allowed them to take advantage of their state's homestead exemption. In Massachusetts, there are also many other types of assets and personal property that may be exempted from bankruptcy aside from a homestead. As this shows, personal bankruptcy is a good way for those facing overwhelming debt to obtain a fresh start on life.

A business failure is no doubt a stressful time in which the business owner might not be thinking clearly. A bankruptcy attorney can be of valuable assistance to business owners experiencing a business failure in planning their next steps carefully and intelligently, charting the best path forward by assessing the current situation and choosing a debt relief option that will put the debtor in the best position for future success.

Source: Forbes, "How to bounce back from bankruptcy and the loss of your home," Cameron King, Aug. 5, 2013