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Men in a tension

The article was written by Liz Pulliam Weston MSN Money

The bills are piling up. The collection agencies are calling. At night you lie awake, wondering how you’re ever going to cope with your debts.

At what point does it make sense to throw in the towel and file for bankruptcy?

There’s no one-size-fits-all answer to that question. In purely financial terms, the answer depends on:

  • Your current situation.
  • Your future prospects.
  • The laws in your state.

There is, of course, another factor to be weighed, which is your personal sense of responsibility for repaying the debt you’ve incurred.

For now, let’s explore the purely financial and legal aspects of bankruptcy.

How the Process Works

A bankruptcy filing halts, at least temporarily, all collection activities, from phone calls demanding payment to more serious actions including foreclosure, wage garnishment, and levies against your bank accounts.

What happens next depends on the type of bankruptcy you file:

In the most common type of filing, Chapter 7, your credit card balances, medical bills, and most other unsecured debts are erased entirely. (Certain other unsecured debts, like student loans and recent taxes, typically can’t be wiped out in bankruptcy.) Technically, some of your property could be taken and sold to satisfy your creditors; the types of property that could be taken vary by state. In some states, for example, only a small amount of home equity is protected from creditors, while in others like Florida and Texas the amount of equity that can be sheltered in a home is virtually unlimited.

Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg, and the Tampa Bay area. If you would like more information on our practice, please consult our website at or call 727-335-7151.