Many people who are having financial difficulties wonder if bankruptcy would be beneficial to them. Bankruptcy can be a powerful remedy in gaining freedom from your debts. The following information is a brief synopsis of what can and cannot be achieved by filing a Chapter 7 bankruptcy.
What a Bankruptcy can do to help you:
- You can wipe out any unsecured debts- Unsecured creditors are those that do not have a lien on any of your real or personal property. Unsecured debts include things such as credit cards, medical bills and back rent to name a few. These types of debts will be completely eliminated in your Chapter 7.
- Eliminate certain liens - certain liens, such as judgment liens on real estate, can be removed in your bankruptcy once applicable motions have been filed with the Court.
- Stop harassing creditor activity - once a bankruptcy is filed the Automatic Stay goes into effect and prohibits creditors from contacting you and continuing any collection activities.
What Bankruptcy Cannot Do:
- Prevent repossession of items by a secured creditor - the underlying debt can be discharged in a bankruptcy (i.e. you would have no personal liability to pay a car loan) but the underlying lien is not removed. Therefore, if you do not continue to pay a secured debt (car loan, etc.) then the creditor may repossess the property. You would not be liable for any deficiency balance that may be left after the sale of the property.
- Wipeout Student Loans- For most people, their student loans will survive the bankruptcy. The only time student loan debt will be discharged in bankruptcy is if the debtor proves, through additional motions and court hearings, that repaying their student loans would create an "undue hardship". The "undue hardship" standard is an incredibly tough standard to meet.
- Eliminate child support or maintenance obligations- Any domestic support obligations are not discharged in a Chapter 7 bankruptcy.
- Eliminate most tax debt- many taxes are not dischargeable in bankruptcy. But, it is possible that if your tax debt is older and meets several standards that it could be eliminated in a bankruptcy.
- Eliminate other non-dischargeable debts - the follow are debts, other than those discussed above, that will not go away with a bankruptcy: debts from personal injury or death caused by driving while intoxicated, fines and penalties imposed from violating a law such as criminal restitution or traffic tickets.
Please be aware that a Chapter 13 bankruptcy is available to help in many situations that a Chapter 7 cannot. For more information on if bankruptcy can help you please call O'Bryan Law Offices at 502-400-4020 to set up a free consultation with one of our bankruptcy attorneys. We look forward to the opportunity to help you through this difficult time.