If you’re deeply into debt and have no way out, the best remedy could be filing for bankruptcy. Once you file for bankruptcy, you no longer subject to some lawsuits and wage garnishments. You’re also not liable to clear medical bills, credit card loans, and some personal loans.
However, filing for bankruptcy doesn’t wholly render you debt-free. In this post, we’re going to focus on what filling a bankruptcy can or not do. Let’s take a look.
What Bankruptcy does
1. An automatic stay
Once your bankruptcy filing is successful, the court issues an order reoffered to as an Automatic stay. The order prevents your creditors from filing lawsuits, wage garnishments, or any other form of creditor harassment. However, not all collection activities will stop. For example, your creditors are allowed to fetch support payments. Besides, the automatic stay doesn’t stop previous criminal proceedings.
With an automatic stay order, you won’t have to worry about eviction and repossession of your property, at least for a short period. However, once the bankruptcy case is complete, you may not be able to stop evictions or property repossessions.
2. It covers some unsecured debts and credit card loans
Bankruptcy comes in handy to wipe out personal loans, medical bills, long-overdue utility bills, and gym contracts. You will be no longer liable to pay several non-priority unguaranteed loans except student loans.
An unsecured loan is a debt that doesn’t require any form of collateral. Instead of relying on your asset as security, lenders depend on your creditworthiness. However, if you used a secured credit card to purchase commodities like furniture, electronics, and jewelry, you have to return the items.
3. Clears secured loans
If you’re unable to clear a debt you borrowed using collateral, you can clear it in bankruptcy. Once you agree to get a secured loan, you have two options; pay the loan or give the secured property. Bankruptcy law won’t stop creditors from repossessing your property. However, if you have a mortgage or a car loan, you won’t be able to keep the house or car.
What bankruptcy doesn’t do
1. Eliminate alimony and child support obligations
Child support and alimony liabilities are priority debts. Bankruptcy doesn’t cover alimony and child support obligations owed before and after the bankruptcy. If you’re unable to pay the child support, the chapter 7 bankruptcy law allows you to do away with other debts to ensure you have the income to pay for child support.
2. Wipe out tax debts
Although it’s possible, eliminating tax debts due to bankruptcy isn’t an easy task. You have to prove that the tax debt is not less than three years old, you didn’t commit tax evasion, or the IRS evaluated your income 240 days before filing for bankruptcy. Remember that bankruptcy won’t discharge previous recorded federal tax liens.
3. Discharge fraud-related debt
If your creditor can convince the court during an adversary proceeding that the debt is fraud-related, filing for bankruptcy may not wipe out such debts. Fraud-related debts include using borrowed property as collateral and giving false information on a loan application.
4. Clear non-dischargeable debts
Non-dischargeable debts include:
• Fines due to criminal restitution
• Debts for damage of property or personal injury due to careless driving
• Obligations you avoided to list in bankruptcy papers.
Filling for bankruptcy may help you get back on your feet but doesn’t render you debt-free. Do you need more help in bankruptcy filing? Check out Fair Fee Legal Services to get professional services from a reliable bankruptcy attorney. We never disappoint!
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