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Bankruptcy's "fresh start" is a myth to many debtors

Bankruptcy filers in Tennessee and elsewhere are having surprising difficulty shaking off old financial habits and truly escaping from the overburden of debt that has cramped their lives. According to several studies of the status of the post-bankruptcy financial status of persons who have obtained relief under either Chapter 7 or Chapter 13, the discharge of their debts has not provided the immediate financial relief that they expected. The reasons are diverse.

A professor who has assisted presidential candidate Elizabeth Warren has studied bankruptcy filers for 25 years. She believes that more people who are in financial difficulty should file a bankruptcy petition and that they should do so without waiting for some kind of miracle. These people tend to postpone bankruptcy and instead take money from their retirement plans. This practice simply makes the financial hole deeper.

Another research project discovered that 25% of debtors find themselves in financially untenable situations even after they have obtained a discharge of their debts. These families tend to suffer from reduced household income caused by illness, job loss or advanced age. Bankruptcy may stop harassment by debt collectors, but it rarely provides long term relief. According to the research, almost one-third of bankruptcy filers consider their financial situation to be unchanged after the order for discharge is issued. The credit industry often makes these situations worse by continuing to offer high interest loans and credit cards to persons who have just completed the bankruptcy process.

Most experts who study personal bankruptcy recommend that a bankruptcy discharge is only part of the solution. People who experience financial hardship must take a hard look at their spending and saving habits and eliminate those expenditures that merely continue their past financially harmful habits. An experienced bankruptcy attorney can also provide assistance in clearing debts and in identifying and eliminating loans that tend to extend a family's financial burdens.

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