Bankruptcy is a helpful solution for those with crushing debt. It can help individuals, families, and businesses get their
finances in order and help establish a financial future. However, bankruptcy doesn’t automatically discharge all debts and give you a completely clean slate in every case. Here’s what to know about filing for bankruptcy and what it might mean for you.
- Bankruptcy focuses on unsecured debt: The primary focus in bankruptcy is to reduce or eliminate debt such as credit card debt, medical bills, overdue utility payments, personal loans, gym contracts, and other debts that haven’t been “secured” through collateral. For instance, when you buy a car, the car functions as the collateral – your lender is potentially able to take the car back from you if you stop making payments. If you stop paying your loan in these cases, you lose what the loan allowed you to purchase.
- You’ll still be responsible for paying some bills: Under Chapter 7 bankruptcy, there are still bills that you’ll need to pay. These include any post-bankruptcy petition bills, or those that come due after filing, such as child and spousal support, utility payments for things like water, electricity, and cell phone service, rent or lease payments, condo or homeowners association (HOA) fees, most taxes, and things like car insurance.
- Not all debts are dischargeable: One of the most common bankruptcy questions is what debts it eliminates or reduces. For the answer, it’s helpful to work with an experienced lawyer. Attorneys who practice bankruptcy law are experts in what to expect and how to proceed. One of the most important things to know is that your Chapter 7 filing can be denied completely if you don’t follow the proper bankruptcy procedures and court processes. Additionally, U.S. bankruptcy law specifies which debts can and cannot be discharged. Non-dischargeable debts usually include:
- unscheduled debts, meaning any debts that are not listed on the bankruptcy petition
- debts in the form of fines and penalties owed to government agencies
- student loans (with very rare exceptions)
- debts for personal injury caused by a DUI or DWI car accident
- debts needing to be paid to certain tax-advantaged retirement plans
- attorney fees for child custody and support cases
- all court fines and penalties, including criminal restitution
However, a payment break may still exist: While you can’t necessarily forestall payments on all debt, filing for bankruptcy may help you get some temporary relief from payments for accounts like student loans, taxes, and court fines. There is an automatic stay protection that stops most creditors and collection agencies from attempting collection activities during bankruptcy in regards to most debts that you can’t discharge.
Not all bankruptcy protects you from foreclosure: While no one gives up everything in a bankruptcy filing, only Chapter 13 bankruptcy can hold off a foreclosure and eviction. A Chapter 13 filing forces the lender to accept a plan that will allow you to make up the missed payments over time if you stay current on your regular monthly payments. If you can demonstrate that you have enough income for a a repayment plan, a Chapter 13 filing can be your best shot at keeping your home. However, while a Chapter 13 bankruptcy petition can halt a foreclosure, it can’t eliminate liens. You won’t be able to keep a property you can’t prove that you can afford.
Your bankruptcy filing will be personal to you: While the laws of bankruptcy essentially dictate what is or isn’t eligible for repayment and discharge, as well as what courts need to see to prove the scope of your current financial situation, what exactly bankruptcy looks like for you will depend on your specific debts, current income, what property you own outright, and even location. Different bankruptcy filings are useful for different things and your bankruptcy process will need to consider your future financial goals, as well as assess your current financial situation.
While this list doesn’t cover everything to know about the ins and outs of bankruptcy filing and aftermath, it can set a foundation for what to expect. As the bankruptcy law stands, bankruptcy can help you get out from under severe debt but may not discharge all debts. Plus, one type of bankruptcy filing may be more relevant and helpful in your particular situation. Ultimately, your bankruptcy will be unique to you and investing in a bankruptcy lawyer may be one of the best decisions you can make for yourself. Visit our website or call our office today to get a free consultation – we can answer your questions and help you understand your options.
