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Can Bankruptcy Solve Your Debts?

Can A Bankruptcy Solve My Debt?

The prospect of declaring bankruptcy depends on your individual state. Whether it involves Chapter 13 and repaying them overtime with core protection or wiping them out entirely with Chapter 7, could be an appropriate solution when faced with an overwhelming situation and high levels of debt.

It’s a big mistake to assume anything about bankruptcy without first doing your research. Knowing what to expect means you have a clear sense of what a bankruptcy will and won’t discharge. You may still have financial obligations even after a Chapter 7 bankruptcy. You need to educate yourself about the total value of the debt that you can discharge with a bankruptcy petition.

Major Impacts On Your Future

Bankruptcy can have a major future impact that touches all aspects of your life. This is why it is important to get the help you need and conduct the research well in advance to determine whether or not bankruptcy is appropriate for you and your types of debt. It may make it challenging for you to get the best limits and rates on credit, obtain credit cards or to keep bank accounts. Bankruptcy may also take some valued or even valuable possessions. For those who are looking at a financial problem with serious stakes, however, bankruptcy still makes the most sense for them. Other options like debt counseling or debt consolidation may have helped with some minor steps towards resolving the issue, but a person who needs help with bankruptcy probably will not be able to fix everything completely.

Not All Debts Are Discharged

Bear in mind that not all debts can be discharged in bankruptcy. The types debt that is discharged is different based on the Chapter that you file with under the bankruptcy code. In fact, there are 19 different types of debt that are typically exempted from discharge under Chapter 7, 11 and 12. There is a shorter list of exceptions that apply to cases filed with Chapter 13. The most common kinds of non-dischargeable debts in bankruptcy include:

  •       Debts owed to tax advantage retirement plans.
  •       Debts for alimony or child support
  •       Tax claims.
  •       Debts associated with malicious and willful injuries to another person or to property.
  •       Debts associated with cooperative housing or condominium fees.
  •       Personal injury debts for accidents caused by a debtor’s DUI.
  •        The majority of government funded or guaranteed school student loans or benefit overpayments.
  •       Debts to governmental agencies or entities for penalties and fines.

Debts that can be discharged in Chapter 13 but not Chapter 7 include:

  •       Those associated with property settlements in separation or divorce proceedings.
  •       Debts incurred in non-dischargeable tax obligations.
  •       Debts for malicious and willful injury to property.

Will Bankruptcy Wipe Our Car Loans?

People are often curious to know the manner in which a Chapter 7 bankruptcy proceeding may affect whether they get to retain ownership of their automobile. Considering you aren’t making payments on your car loan, whether you have the ability to retain it is not very likely.

There is a vehicle exception to the rule based on the degree of value preserved in the car. Also not that regardless of whether you are meeting your payment obligations on your automobile loan at the time of the filing, don’t assume that you’ll be able to keep the car.

You will need to decide if your goal is to relinquish the car or retain its ownership, as well as consider whether you really can afford to keep up with the payments.  If you can, there is a formal acknowledgment called a “Statement of Intention” for Individuals that use Chapter 7 for Bankruptcy. Likewise, if you’re leasing your car, you’ll need to identify whether you will decline or assume the lease on the statement and commit to the repayment of your loan.

Ultimately, it really depends on the circumstances surrounding your particular bankruptcy and it’s best to seek the advice of counsel in order to learn more and know your position before filing.

Student Loans and Bankruptcy

Student loans are typically not dischargeable in bankruptcy unless you can illustrate that your loan payment leads to an undue hardship on you, your family members or your dependents. This is typically classified as a non-dischargeable debt meaning that you cannot completely eliminate it when you file for bankruptcy and you will still be responsible for paying it off.