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Bankruptcy may help individuals eliminate debt

Bankruptcy is governed by federal law, so the regulations are generally the same in Kentucky as they are in other states. The Bankruptcy Code was designed to allow businesses and individuals restructure or eliminate debt. The different kinds of bankruptcy are categorized as reorganizations and liquidations. Filing fees cost between $275 and $335, and there may be other fees associated with a bankruptcy case.

Most courts will allow for the payment of fees in installments for those who demonstrate that significant financial hardship would result from paying filing fees. Chapter 7 is the most common type of bankruptcy for individual filers and is sometimes referred to as liquidation, complete bankruptcy or straight bankruptcy. Individuals should consider Chapter 7 bankruptcy if they have no way of paying debts down or if creditors are taking legal action to collect.

Chapter 13 bankruptcy, on the other hand, is designed to reorganize debts to allow at least partial repayment. It is sometimes called wage earner's bankruptcy. Debtors who file for Chapter 13 bankruptcy protection will propose a repayment plan that will last either three or five years. The debtor in Chapter 13 bankruptcy must make mortgage payments on time if he or she wishes to protect a residence. One major advantage of this chapter is that it protects co-signers from liability in many cases.

A Chapter 7 bankruptcy will be listed on the debtor's credit report for a period of ten years; Chapter 13 comes off of credit reports after seven years. Kentucky individuals who are struggling to manage personal or business debt may want to schedule a meeting with a lawyer with experience in consumer bankruptcy who can often review the facts of the debtor's situation and suggest alternative avenues for debt relief.

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