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Benefits of not turning to bankruptcy as your "last resort"

Dealing with debt can be an overwhelming experience. Massachusetts residents often find ways to address debt on their own. However, this is often a complex and difficult step to take. Because reducing spending and saving money is not always possible, individuals struggling with debt problems should gain an accurate picture of their situation and ways to effectively resolve it.

When it comes to debt relief options, many people seek out the mechanisms that help them avoid bankruptcy. While filing for bankruptcy is a major step, it should not be looked at as something to avoid when dealing with financial problems. In fact, it often turns out to be a much better option to initiate the bankruptcy process than putting it as a "last resort."

For example, many debtors will consolidate their debt, specifically credit card debt, into one affordable payment. And, by working with a counseling agency, within 60 months a debtor may be able to wipe out this form of debt with any added interest fees. While the debt is eliminated in five years, had those payments gone into a retirement account for just those five years, the debtor has lost more money than they truly thought.

On the other hand, if that same debtor filed for a Chapter 7 bankruptcy, this would have cost them an average of $1,500 to $1,800 from start to finish, taking roughly 90 days. In addition, a debtor has liquidated their credit card debt, which allows them to take what they would have paid each month and apply it to a retirement account or other ways to benefit them financially.

Bankruptcy doesn't often seem like the easy or best option, but for many debtors it is the only way to end their debt problems and obtain a fresh financial start.

Source: The Huffington Post, "Why a Chapter 7 Bankruptcy Should Be Your First Option and Not a Last Resort," Steve Rhode, May 7, 2016

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