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How Bankruptcy Works - YouTube
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if you lived in ancient Greece and were
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unable to pay your debts the system came
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down pretty hard your creditor could put
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you and your family into debt bondage
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and force you to work however he saw fit
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until your debts were paid off
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or you die today thankfully in the vast
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majority of the world debt slavery is a
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figure of speech as opposed to well real
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slavery but the stress caused by
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mounting debt can still feel like you're
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dragging along a ball and chain massive
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medical bills spiraling credit cards out
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of control student loans can make the
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strongest among us weak at the knees
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some magic phrase you could just shout
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to make it all disappear
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I declare bankruptcy as you know and
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Michael Scott quickly learns bankruptcy
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isn't just a word you declare and your
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debts disappear it's a complicated legal
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status that is designed to provide
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relief to those who are financially
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insolvent
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if you've cut your expenses down to a
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bare-bones lifestyle and still can't
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make minimum payments on your loans it
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might be time to think about bankruptcy
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that relief can seem like a life
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preserver when you're caught in a rising
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sea of debts but how does bankruptcy
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work what are the risks and can it
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really make all of your problems
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disappear in the United States there are
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multiple forms of bankruptcy you can
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declare for debt relief there's
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bankruptcy for businesses farmers even
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municipalities but the most common forms
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of personal bankruptcy you'll hear
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people talk about are chapter 7 and
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chapter 13 the first thing you need to
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know is that believe it or not it
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actually costs money to file for
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bankruptcy three hundred and thirty five
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dollars in fact to file for a chapter
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seven and three hundred and ten dollars
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for a chapter 13 if you choose to hire a
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bankruptcy lawyer you will also be
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responsible for paying the lawyers fees
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which will likely be somewhere between
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fifteen hundred and four thousand
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dollars depending on which kind you file
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for and the complexity of the case
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chapter seven bankruptcy is a
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liquidation bankruptcy where non-exempt
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property is sold and you
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to pay off your debt it's generally
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meant for people with limited incomes
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who do not have the ability to pay back
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all or some portion of their debts but
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the government doesn't just allow anyone
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to file for it first you must pass the
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chapter seven means test the easiest way
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to pass is if your annual income is
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below your state's median this number
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usually falls between 40 and $70,000
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again depending on your state you can
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find the specifics for each state here
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if your income isn't low enough you
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might still be able to pass the test by
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proving you don't have a lot of
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disposable income to find out if you
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pass either of these tests you can
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simply fill out government forms 122 a
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one and two if you qualify the court
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will decide what is up for grabs to sell
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off but States usually have a list of
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personal property exemptions such as a
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basic vehicle some equity in your home
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even cash you've gotten your bank
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accounts and retirement savings so you
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won't end up living on the street or
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without transportation if you're married
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and filing together that can typically
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double the value of exemptions but there
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is definitely downsides you won't be
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allowed to use credit cards for quite a
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while maybe years and those student
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loans you hate yeah the lenders will
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have to stop harassing you with calls
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but they're not going anywhere
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unfortunately student loans are not
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eligible for forgiveness if you can't
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meet the requirements of chapter 7 you
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might want to check out chapter 13 also
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known as reorganization bankruptcy your
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property is not sold when you file but
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you will be required to complete a three
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to five year court-mandated payment plan
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if you play by the courts rules and
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don't miss a payment any unsecured debts
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that remain after that time period like
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credit cards and medical bills may be
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discharged or forgiven to be eligible
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you have to have regular income
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unsecured debts under three hundred
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ninety four thousand seven hundred
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twenty-five dollars and secured debts
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under 1 million one hundred and eighty
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four thousand two hundred dollars but as
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with chapter seven even if you
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successfully complete the process there
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are certain types of debts not eligible
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for forgiveness like tax debt child
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support and yep once again student
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it's also probably no surprise that
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bankruptcy can dramatically decrease
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your credit score and will stay on your
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report for seven to ten years this can
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cause issues with potentially finding a
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place to rent or even change jobs since
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many employers now look at credit
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reports but if you were already behind
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on your debt payments before you filed
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your credit score is most likely already
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shot and it won't make it that much
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worse and don't despair bad credit
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scores are like broken bones they're
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designed to heal over time assuming you
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follow doctor's orders and don't engage
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in the behavior that broke it in the
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first place keep in mind this bankruptcy
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is also going to be on public record
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it's not like you'll be forced to wear a
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scarlet B on your chest but if the court
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decides to take your payments from your
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paychecks directly your employer will be
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notified as will any co-signers that may
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be on your loans then there's one last
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thing you'll be required to do before
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your debts are discharged you'll have to
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attend an approved or spun consumer debt
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these tend to focus on financial
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education and lessons on budgeting and
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are designed to help prevent you filing
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for bankruptcy again if there were only
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a place to learn these lessons
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beforehand bankruptcy is not a simple or
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fast process filing and acceptance can
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take many months and you have to be 100%
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diligent about following every court
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order to the letter and paying every
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bill you're still on the hook for like
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property taxes and student loans if it's
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used as a last resort bankruptcy can
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offer you the relief you need it might
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put you through the wringer but at some
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point it will end and you can start over
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and that's our two cents thanks to our
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patrons for keeping two cents
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financially healthy click the link in
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the description if you would like to
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support us on patreon if you or someone
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you know has gone through personal
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bankruptcy what do you wish you had
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known beforehand let us know in the
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comments
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you
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