Filing Bankruptcy Won’t Get Rid of All Your Debts

Two types of bankruptcy for individual debtors are common in the United States, called chapter 7 bankruptcy and chapter 13 bankruptcy. Chapter 7 bankruptcy, also called liquidation bankruptcy, is the most common form of bankruptcy filed in the United States; after a successful chapter 7 filing, all dischargeable debts are cleared. Chapter 13 bankruptcy, also called reorganization bankruptcy, creates a payment plan which allows one to repay debts over a period of time under more reasonable conditions.

Chapter 7, or liquidation bankruptcy, is the most common type of bankruptcy filed in the United States. In contrast to chapter 13 bankruptcy, chapter 7 bankruptcy offers immediate relief; after a successful chapter 7 filing, all dischargeable debts are wiped out.

In Chapter 13 bankruptcy, the debtor will have a repayment plan so that they can pay off all their debts over a period of time. Some debts may be erased immediately, but this doesn’t always happen. One major advantage of Chapter 13 bankruptcy over Chapter 7 bankruptcy is that the debtor may be allowed to hold on to some assets which would have been otherwise liquidated under Chapter 7.

Unfortunately, there are some debts which are only dischargeable under chapter 13 bankruptcy, and certain debts which are not dischargeable at all. Other debts are dischargeable only under chapter 13 bankruptcy, including: – Marital debts incurred in a divorce or settlement agreement – Debts incurred to pay a non-dischargeable tax debt – Court fees – Condominium, cooperative, and homeowner’s association fees – Debts from retirement plan loans – Debts that could not be discharged in a previous bankruptcy

Debts which are not dischargeable by any means include: – Domestic support obligations, such as alimony and child support payments – Student loans, except in cases of undue hardship – Debts incurred by acts of fraud – Debts which arise from willful or malicious acts – Criminal penalties – Intoxicated driving debts

Income tax debts can be discharged; however, certain circumstances must be met. For such debts to be discharged, the debtor must have filed a tax return for the tax year in question; the debt must arise from a tax return filed at least two years before the filing; the debt must arise from a tax return that was due at least three years before the filing; and the taxing authority must not have assessed the debtor’s liability for the taxes within the last 240 days.

For a bankruptcy filing to work out the debtor must honestly list all debts and obligations. Debts which cannot be assessed for reasons which are under the debtor’s control (e.g. the debt is not listed or the address given is incorrect) may not be cleared.

Filing bankruptcy doesn’t mean that your financial life is over. you may still have liens on your house, but at least now no one will be a double to garnish your wages or access your bank account. Do expect to have difficulty getting loans. Cash is going to be your best friend for the next few years.

While filing for bankruptcy can relieve you of the burden of debt, a prospective filer must do their due diligence to know which debts cannot be discharged, and to make sure that all dischargeable debts are, in fact, discharged. Sometimes a person has no choice but to file for bankruptcy because of medical bills or other forces beyond their control; just remember that you control what you do with your life after bankruptcy.

No related posts.