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If you are in serious
debt
and you're considering
filing for bankruptcy
there are some things that bankruptcy cannot help you with that you'll need to be
aware of before you file.
Bankruptcy and Secured Credit
If you own certain types of property that are secured by physical assets such
as a motor home, boat or automobile, bankruptcy will not help you with these
assets. In fact, filing bankruptcy will eliminate the debt that is
typically associated with these assets but there is nothing that will stop the
creditor from seizing the assets.
Child Support and Alimony Payments
Filing for bankruptcy does not allow you to eliminate existing back child
support or alimony payments. In fact, if you file Chapter 7 bankruptcy
proceedings you will quickly discover that these back charges are automatically
added in by the court (often with interest) and are not eliminated. If you file
a Chapter 13 (reorganization) your plan will include payments to repay these debts
as part of the overall plan.
Student Loans and Bankruptcy
Student loans except in extremely rare cases are not eliminated by filing for
bankruptcy. The only way these loans would be cleared by bankruptcy is if you
can prove beyond any reasonable doubt that repayment would cause extreme financial
hardship.
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Bankruptcy and Taxes
Typically most tax debts are not able to be discharged through bankruptcy.
In some cases income taxes that are three (3) years old or more may be considered
part of your bankruptcy but if there are suspected cases of fraud, failure to
file or other circumstance, these may be denied. Payroll taxes are not eligible to
be discharged during bankruptcy.
© iStockphoto.com - GeofferyHolman
Personal Injury/Restitution Awards
If you have been ordered to pay restitution or personal damages these are not able
to be discharged during bankruptcy. You will be required to include all of these items
on your bankruptcy filing (as debts) but they will not be included in the debts
to be discharged.
Debts You've Not Included
If you file for bankruptcy and you fail to include debts that should have
been listed (secured or unsecured) you cannot later claim that they are discharged
as a condition of a bankruptcy. To ensure that you have included all dischargeable
debts you should request copies of your
credit report
and make sure that each of the
debts you believe you owe is included in your original filing.
Conclusion
With the exception of revolving consumer debt or medical bills, you are
obligated to repay most debt even when you file for bankruptcy. If the majority
of your debt is secured debt (i.e. home, automobile) or non-dischargeable
debt (i.e. student loans, taxes, child support, alimony, etc.) you may want to
consider filing
Chapter 13 Bankruptcy
(i.e. restructuring of debt) versus
Chapter 7 Bankruptcy
(i.e. discharging debt).
Make sure you fully understand your rights and your obligations when filing for
bankruptcyso you don't find yourself with debt you thought would be discharged.
Related topics: Bankruptcy Introduction,
Types of Bankruptcy,
New Bankruptcy Laws,
Life After Bankruptcy
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