A law professor at the University of Illinois says that bankruptcy is the way to go when you have valuable assets to protect. While filing for bankruptcy can be very helpful when it comes to wiping out debt, it comes with serious consequences. In many cases, it is best to use bankruptcy as a bargaining chip when dealing with creditors.
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“Having assets and income to protect are an important hallmark of a need to file bankruptcy,” said Robert Lawless, law professor at the University of Illinois and member of the National Bankruptcy Conference. The average Chapter 7 personal bankruptcy case filed in 2012 had nearly $116,000 in total assets and median monthly income of $2,764, according to the Office of U.S. Courts. For the ins and outs of consumer bankruptcies, check the U.S. Bankruptcy Court’s “Bankruptcy Basics.”
Costs for legal fees are typically around $1,500 or more, limiting the bankruptcy option. A study by the National Bureau of Economic Research found that the most cash-strapped consumers lack the funds to file bankruptcy. Other drawbacks include restrictions on filing bankruptcy again — such as an eight-year wait for filing another Chapter 7 case — and a 10-year demerit on your credit report. Continue reading…