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When is the right time to seek Chapter 7 bankruptcy?

In the early stages of financial distress, many Arkansas residents firmly believe that the situation is only temporary and that it will be possible to fulfill any outstanding financial obligations. They don't consider Chapter 7 bankruptcy as an option or feel that it is a last ditch effort, at best. As time goes on, things may shift and that optimism can fade. This is especially true for consumers who have tried and failed to work with their banks to have a loan restructured.

Many people are confident that their lending institutions will work with them to restructure a loan and help the borrower get back on track to repay that debt. In reality, however, banks are often inflexible in regard to lending terms. In many cases, the bank representatives have no authority to change those terms or work out a creative solution that would allow repayment. This leaves the consumer with little option in addressing the debt.

In the end, many borrowers will continue to struggle until the bank files a lawsuit to reclaim the debt. At that point, the bank is likely to win unless the borrower can disprove the validity of the debt. If a judgment is made in favor of the bank, the next step is often wage garnishment. This only serves to further complicate the borrower's financial standing, as there will now be even less money available to cover expenses and debt service.

In some cases, the end result is Chapter 7 bankruptcy. Many Arkansas consumers who go through the bankruptcy process wish that they had sought this type of debt relief far sooner. Once old debt has been eliminated through the discharge process, consumers can begin rebuilding their credit and financial security to ensure that the future does not hold similar struggles.

Source: The Huffington Post, "My Bank Won't Work With Me So I Can Pay My Debt", Steve Rhode, Jan. 13, 2016

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