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Bankruptcy may erase unsecured debt and allow retention of house

Consumers in Pennsylvania who are so overwhelmed with unsecured debt that it would take many years to pay their way out of it may be concerned about how to resolve the issue. When an individual or married couple cannot pay a reasonable amount each month toward their accumulated unsecured debt balances, while simultaneously affording to have appropriate shelter, food and necessities, the situation may have reached critical mass. It may be time to have an evaluation with a consumer debt counselor, and in many cases, with an experienced consumer bankruptcy attorney. 

Every debt relief remedy except bankruptcy seeks to pay off the consumer's unsecured accounts, either quickly on a discounted basis or monthly over an extended time period. The problem that these remedies very often run into is that the consumer's income is insufficient to handle either a discounted settlement or an extended monthly payment plan. When an economically strapped consumer is convinced to try a debt relief remedy, inevitably problems arise, and the payments are not maintained.

In that scenario, dunning and debt collection litigation will start right up again and the cycle of frustration for the consumer will not be broken. Chapter 7 bankruptcy, however, eliminates most unsecured debt for qualified consumers and wipes it forever off the books. Because this is called a liquidation bankruptcy, the filer can theoretically lose property that will be seized and distributed to creditors. However, for most consumer filers this does not happen due to the existence exemptions under federal and state law. 

Those who will benefit greatly by that kind of swift and immediately decisive relief often ask whether they can keep their cars and their home. The answer is affirmative in most cases. In Pennsylvania, the debtor will usually choose the ample bankruptcy exemptions provided under federal law. However, the issues of qualification to file bankruptcy and the exemptions applicable are generally complicated. Therefore, it is best to first consult with an experienced consumer bankruptcy attorney prior to making a decision. 

Source: The Washington Post, "What happens to your house when you file for bankruptcy", Jonnelle Marte, July 26, 2016

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