Bankruptcy is probably the easiest and most straight-forward way that someone needing a financial do-over can be freed of his debts. Filing for bankruptcy will allow many debts to be discharged and the debtor can begin rebuilding his financial future from that point forward. However, not all debts are discharged in bankruptcy. Furthermore, Chapters 7 and 13 treat some debts differently.
If you are burdened by debt, knowing what debts can be discharged in bankruptcy makes a huge difference in planning and rebuilding your financial future.
Some Debts Will Remain After Filing for Bankruptcy
Filing for bankruptcy has its perks, including wiping out most unsecured and credit card debt, stopping creditors from making harassing calls, stopping wage garnishments and bank levies, and removing repayment responsibility for some liens. Whether a debt will be wiped out in bankruptcy generally depends on the type of Debt. Even if a Debt – such as taxes - cannot be wiped out, bankruptcy might give a consumer an opportunity to pay it back without interest or penalties. .
Even if someone has filed for bankruptcy, they may still be responsible for paying off some of their debts, including:
- Penalties arising from violating the law,
- Debts secured by an asset that the Debtor wishes to keep,
- Restitutions for driving under the influence or other crimes,
- Child support, alimony payments, and other family law responsibilities,
- Debts not listed on the bankruptcy filing,
- Most student loans,
- Certain tax debts accrued prior to filing, and
- Debts that are proven to be related to fraud, embezzlement, and certain other willful misconduct
Depending upon the details of the bankruptcy, these debts will either need to be paid in part or in full during the repayment process, or they will remain when the bankruptcy is completed.
When a consumer understands what debts will be discharged, the consumer can make an intelligent decision to either propose a repayment plan in a chapter 13 or file a simple chapter 7, and then deal with the remaining debts after the bankruptcy is completed. If the bankruptcy consequences are analyzed correctly, the consumer will get out of debt and create a solid financial plan for himself moving forward.
This process, however, is not always easy. Correctly assessing how the various debts will be treated in bankruptcy requires advice and guidance from a skilled, experienced bankruptcy attorney.
Working with a bankruptcy attorney at the Fuller Law Firm, PC can help provide options for filing and how to get back on a good financial track on in the future.