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Consider bankruptcy before draining retirement funds

Ohio consumers who are facing overwhelming debts might share the opinion that debts must be paid at all costs. It is often said that all avenues should be tried before filing for bankruptcy, though the most sensible remedy may be to file for personal bankruptcy before all assets such as retirement accounts are drained. Why would a consumer expose him or herself to debt collectors and other creditor's harassing actions rather than opt for the protection of bankruptcy?

The effect that bankruptcy has on a filer's credit score is often cited as the reason not to file. In most cases, by the time a person files for bankruptcy, all the past-due debts have already affected his or her credit score. There are certain fees to pay in connection with a bankruptcy, and it may be unwise to wait until there is no money left to file. Once consumer debts have been discharged in bankruptcy, it typically has a positive effect on his or her credit score.

The positives of bankruptcy include the discharge of most (and perhaps all) unsecured debts such as credit cards, medical debts and many personal loans, along with past due utility and rent bills. Certain debts (such as child support and most taxes) will not be discharged, but being relieved of most other debts may enable a filer to pay those. The automatic stay that becomes effective when a person files for bankruptcy offers protection against debt collectors and all forms of creditor action, such as wage garnishments, repossession and foreclosure.

Some Ohio residents have found that it may be wise not to leave bankruptcy as a last option. Researching the pros and cons before all assets are depleted makes good sense. A consultation with an experienced bankruptcy attorney can provide the necessary information related to the different options under the U.S. Bankruptcy Code. This will allow a consumer to make informed decisions related to his or her future financial stability. 

Source: nerdwallet.com, "When Bankruptcy Is the Best Option", Liz Weston, May 23, 2016

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