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'Octomom' files for Chapter 7 bankruptcy, seeks fresh start

Nadya Suleman, likely better known to most New Jersey residents as the Octomom, has recently filed for bankruptcy. The mother of 14 has a mountain of debt to deal with -- about 20 times the amount of her assets -- that her Chapter 7 bankruptcy filing will work to cut down. For Suleman, the bankruptcy will hopefully provide a fresh start for herself and her family.

A Chapter 7 bankruptcy filing will liquidate all of a debtor's assets and discharge most of his or her unsecured debt. For Suleman, it is said to be her best option as she has very limited assets to use to pay back to creditors compared to her large debt. Should she have gone a route that allowed her to keep some assets as a method of paying creditors -- as some other bankruptcy filings may do -- she would still not have the finances available to make those payments. She also has no significant property to hold onto, having her current rented home foreclosed upon for owing $30,000 in back rent.

While Suleman has an erratic career as a celebrity, she holds a potential for significant earnings in the future. Luckily for her, potential future earnings are not a factor in filing for Chapter 7 bankruptcy, or any form of personal bankruptcy. On the other hand, creditors do consider future earning potential, which may benefit Suleman in obtaining credit cards and similar credit after the bankruptcy procedure is over.

For the Octomom, as well as New Jersey residents who may be in similar situations of minimal assets and massive debt, Chapter 7 bankruptcy will allow a fresh financial start that will hopefully get her back on track.

Source: TIME, "Octomom Files for Bankruptcy, But is It a Smart Move?" Martha C. White, May 4, 2012

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