Can Bankruptcy Eliminate all Debt?

Bankruptcy Attorney

There are some debts or payments that even bankruptcy cannot protect you from. These include student loans, some back taxes, and court-ordered child support or alimony payments. Secured debt is still secured debt, and if you intend to maintain your right to keep and use the collateral, your house, and your car, for example, you must work out a plan for repayment and the court must approve your plan. There are several options for filing bankruptcy and still keeping your house and car.

Student Loans

Most courts are reluctant to discharge student loans. You may be able to obtain a discharge on your loans if you can demonstrate that paying them creates an undue hardship, but this is difficult to prove unless you have become unable to work due to disabilities, and have no prospect of being able to earn money. Even then, you must file a separate motion with the court and present your case before the judge.

Back Taxes

Unless the due date for the return was three years or before you filed bankruptcy the court will have nothing to do with it.

Child support and alimony

The laws are very clear; if you owe child support or alimony payments to ex-spouses, bankruptcy will not alleviate your responsibility to pay these obligations.

Secured Debt

The court cannot decree that you no longer have to make house payments if you plan to keep your house when you emerge from bankruptcy. To retain the use of the assets providing collateral for loans during and after bankruptcy, you must have in place a repayment agreement plan that the court will approve. When you discharged from bankruptcy protection, the liens on your secured debt and still intact unless you chose, as part of your chapter 7 case, to surrender the asset. If you want to stay in your house and keep our car, you would need to continue making payments on the loans and also make an agreement with your lender on the way to make up any missed payments.

For many consumers, gaining relief from massive unsecured debts through bankruptcy enables them to get caught up with their essential secured debt. You should thoroughly discuss your situation and goals with a qualified bankruptcy attorney. The attorney will then be in a position to advise you about how to proceed with bankruptcy and still retain the use of the assets.

Leave a Reply

Your email address will not be published. Required fields are marked *