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Bankruptcy Questions

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An IRL friend is thinking about filing for bankruptcy and wanted to know:


1. What is the procedure?


2. Can you pick-and-choose which bills you need relief from? Or, is it a mandatory clean sweep?


3. If you have a mortgage, how does this affect your mortgage? Can you lose your house?


In all fairness to the people, they did not run up debt in a reckless way; they were inundated with several serious problems, including medical issues, and they are really struggling. They live on a shoestring budget so there is nothing left to cut. (We've shared ideas for how we cut back, etc.) Their mortgage is dirt cheap, and is considerably lower than paying rent, which is an option they investigated but found it would greatly add to their budget crisis, plus homes in their area are not selling. I have personally seen them do without and not complain. It is such a sad situation. There are no little kids involved. The medical stuff continues. They have talked about bankruptcy but are really concerned about losing their house; they would have nowhere to go (no viable family options). So those were the questions she could think of. Oh, and they're not sure who you talk to in order to start this process or to get information - a lawyer? a CPA? who/what?


TIA! I'll forward your help along to her!

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I would advise them to speak with a couple of bankruptcy attorneys. The consultations for most attorneys are free, and they can go from there.


From my knowledge (years ago) while I was getting my Paralegal degree, you can keep your house as long as it is current and you will continue paying on it. It is excluded from the bankruptcy. The other bills would be included, unless they have student loans. From memory, those are the only 'loans' that cannot be included.


Again, an attorney would be their best bet for current laws and specific information for their situation.


HTH. ;-)

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There are different kinds of bankruptcy and I forget which is which. There is the one where you just write it all off and start over.


The other sounds like it may be more like what your friend needs. It is when you will need to continue paying on certain debts, such as a mortgage. You can file separately from a spouse so that one person could still have credit.


As an example, a family member had a situation where a business went under and the thing that was really getting to her was the state taxes the business owed, in her name. She filed for this more forgiving type of bankruptcy because no matter what she had to pay the tax bill. So she had all her credit card debt included in the bankruptcy (she was using the credit cards to keep the business afloat), which allowed her to free up enough funds to work out a payment plan with the tax people. She also kept her mortgage out of it.


A bankruptcy lawyer should be able to provide much more specific advice.

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