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Do fewer bankruptcy filings mean all is well? Not necessarily

Bankruptcy filings are down as we close out 2013. According to Marketplacel.org, the number of individuals seeking debt relief through the various forms of bankruptcy is down by about 30 percent from what it was at the height of the recent recession.

Does that mean we're in the money again and all is well? Gauging from observations from various experts, it would be a mistake to think so. The reality, as these experts note, is that there is no logical "if-then" scenario when it comes to financial hardship. Just because we have economic recovery doesn't mean individuals facing financial distress are any better off. 

Indeed, as one law professor explains, bankruptcies often spike when times are good because credit is loose. Ease of access means that consumers are more inclined to take on greater debt risk, anticipating that their employment circumstances will carry them through come what may. If the job doesn't pan out, though, the protections afforded through bankruptcy may be wise to pursue. Consulting an attorney can help in making the decision.

Some might argue that they don't have the cash required to afford the attorney. Forget about being too big to fail. These folks believe they're too broke to file.

This is the situation that one husband and wife feels they're in. They've been married for about six years and for most of that time, they say, one or the other of them has been unemployed or underemployed. Both came into the relationship with heavy debt, he in the form of a mortgage and credit card balances, she in the form of student loan debt.

Seeking some relief, they managed unload the mortgage through a short sale. But their hopes of getting further help through bankruptcy have been stymied in part because of her student loans. They're not dischargeable.

Both are now working, but the couple doesn't want to risk spending money filing on their own in case they foul up the paperwork, which is always a concern. But they also don't feel they can afford the price of an attorney.

We would offer to our Texas readers, though, the advice that it's best to meet with an attorney to explore all possible options before concluding there is no possible remedy available.

Source: Marketplace.org, "Bankruptcy filings are plummeting," Annie Baxter, Nov. 5, 2013

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