One of the best advantages that bankruptcy offers is that this step can help you wipe out multiple debt types in one single move. Bankruptcy offers consumers, couples, and businesses protection against a wide range of debt types. This includes medical debt, credit card obligations, many business expenses and purchases, and many other types of debt.
There are some debts that bankruptcy can not eliminate, and these may depend on the specific situation and circumstances. Child support, alimony, and certain tax debts are often not eligible for discharge. Taxes that are owed may be discharged under certain situations though, and there are a number of requirements that must be met in order for this goal to be achieved.
Often bankruptcy is considered only for a single debt type, such as credit card obligations or unpaid medical bills. Consumers need to understand that bankruptcy can help you deal with various types of debts that you may owe. Lawsuits, court judgments, and other orders for financial payment may also be dealt with effectively by filing for bankruptcy protection.
Before you can even consider a bankruptcy petition you need to know your exact financial situation. A common response to creditors by consumers who can not pay is to ignore the phone calls and letters, but this only makes things worse. Sit down with all of the bills and creditor obligations, and make a list of each debt owed and the amount that is required to take care of the listing. Now add up everything that you owe to everyone. The total amount may shock you, and bankruptcy can help you reset this total to $0 in many cases.
The time period that is used for the debt is another factor that is important. Each debt that you incur can only be collected on for a specific period, which may be anywhere from 2-7 years depending on the state you reside in and other relevant factors. If you owe debts that are already past the allowed collection limit then these should not be paid on. If you make any payment at all then this can start the time line over and you could legally be obligated to pay the full amount once again.
Secured debts involve property that is used to secure the loan or other obligation. This includes mortgages and vehicle loans, and you may not be able to discharge these debts without losing the property that was used for security. Under chapter 13 of the bankruptcy code it may be possible to keep the property as long as you make the payments when they become due. Past due amounts can be included in the repayment schedule that the court approves, giving you a reasonable time to get these caught up.
If you owe back taxes then bankruptcy may help in a couple of ways. In certain cases these may be discharged as long as all of the requirements are met. In other situations you can arrange to make payments on these debts through the repayment schedule and prevent the loss of any property or financial resources.