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3 Ways to Turn a Bankruptcy Filing into an Unmitigated Disaster

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filing for bankruptcyOne of the biggest and most daunting challenges of filing for bankruptcy, is that most people who make this decision are typically under severe stress — which, as any psychiatrist or psychologist will tell you, is not the ideal time (to put it mildly!) to make major life decisions.

However, the fact remains that people who file for bankruptcy typically do not have time on their side. They are facing an unsustainable debt scenario, and their creditors are unwilling to negotiate or compromise. On the contrary, their creditors are likely dialing up their aggressive collection tactics, in the hopes that debtors will get so emotionally exhausted that they throw in the towel, and just pay up to make them go away.

How Will Filing for Bankruptcy Impact Your Credit Score?

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filing for bankruptcyObviously, understanding how a bankruptcy might impact your credit score is critical information that you need to know before you (potentially) make this major decision — not after. Unfortunately, this is also one of the most misunderstood and misinformed topics in the financial world.

Why is this the case? It’s because some firms in the credit counseling and debt consolidation fields are on a mission to prevent people from filing for bankruptcy — not because they have their clients’ best financial interest in mind, but because they have their OWN financial interest in mind. In other words: they don’t (and can’t) help facilitate and support a bankruptcy filing. And a major way they generate new business is, basically, by trying to terrify people from filing for bankruptcy.

Senior Citizens: Is Filing for Chapter 7 Bankruptcy the Right Decision for You?

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chapter 7 bankruptcyThe belief that debt is a “young person’s problem” is a myth. Across the country, thousands of senior citizens are facing large debt loads due to a variety of reasons, such as excessive medical costs, decreasing pensions, investment losses, and in some cases, misappropriation by fraudsters who prey on elderly victims, and the list goes on.   

If you are a senior citizen who is concerned about substantial and unsustainable debt, then here are some key facts that you need to know about potentially filing for chapter 7 bankruptcy:

  • Filing for chapter 7 bankruptcy will wipe out most of your debts, including your medical debt (provided that it is not incurred after you file).

Considering Bankruptcy? Here are 3 Tips to Head in the Right Direction

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bankruptcyIf you are facing a financial situation in which your debt load is unsustainable and your creditors are unwilling to negotiate, then filing for bankruptcy may be both viable and advisable. This is fundamentally because, despite the fact that the word “bankruptcy” is emotionally-loaded (and rather terrifying), it is not a moral judgement: it is a legal protection.

Furthermore, while it is certainly not a step that anyone wishes to take or a decision that should be taken lightly, the fact is that filing for bankruptcy is fairly common. For example, in 2016 nearly 800,000 individuals and businesses filed for bankruptcy. 

If bankruptcy is something that you are considering — or may have decided to do based on your research and analysis — then here are 3 tips to head in the right direction: 

Advice for Filing Taxes After Bankruptcy

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filing taxes after bankruptcyMany people are confused or concerned — or both — about filing taxes after bankruptcy. The first thing to keep in mind is that, while there are indeed some steps to take, the post-bankruptcy filing process should not a bureaucratic nightmare. Here is what you need to keep in mind: 

After filing for bankruptcy, there are two returns associated with your identify/profile as a taxpayer as far as the IRS is concerned: an individual filing (Form 1040), and a return on behalf of your estate (Form 1041).

Filing Taxes After Bankruptcy: Chapter 7

If you have filed (or will file) for chapter 7 bankruptcy, then the two returns are completed and submitted separately. That is, you fill out and send a Form 1040 return, and the Bankruptcy Trustee fills out and sends a Form 1041 return on behalf of your estate.