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Basic Guide to Bankruptcy

The prospect of bankruptcy would come as something new to most people. And if one is not familiar with it, it could be daunting and confusing. One way to take charge of the situation is to arm oneself with information about it.

And so if you think that you might have to tread that new territory, learn about the basics of bankruptcy from our guide.

You might be down on your end and contemplating about filing for bankruptcy. Or you may be afraid you might have to face bankruptcy filing by a creditor. Before hastily deciding on anything, find out what you should know before filing for bankruptcy so that you can make an informed decision. Choosing bankruptcy as an option to solve your financial difficulties has major consequences, especially on your credit record. And so it is best for you to first find ways how to avert bankruptcy if it is still possible.

Creditors, too, know that bankruptcy is not really an option you take as your first choice. Unless, a creditor has a big claim and he is sure there is still substantial value to extract from the debtor's estate, he is better off helping a debtor surmount debt and continue doing business. That is because it is not a guarantee that all debts will be paid in bankruptcy. Secured debts take precedence over unsecured debt comes payment time. If not enough money is raised from the sale of the debtor’s estate, some creditors – those farther down the line – might not get anything at all.

And so it is often best for both debtors and creditors to work together to find a solution that will be most favorable to both parties. But if there’s really no way out -- a person is debilitated by a disease and is unable to work, for instance – then, a person may consider hiring a bankruptcy attorney to help him prepare to take the steps in filing for bankruptcy. A bankruptcy attorney can explain what types of bankruptcies are there and what could be the best one for the debtor under his present circumstance. He can explain what debts are dischargeable under a personal bankruptcy, and what differentiates secured and unsecured debts.

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