Struggling with debt can be one of the most stressful situations a person can face in life. With payments and wage garnishments following you everywhere you go and debtors harassing you at every turn, it can feel like there is no solution. However, consulting with a bankruptcy attorney can provide you with a solution that will alleviate your seemingly inescapable financial situation.
Before you get started, it's important the you first understand the bankruptcy process so that you understand what this tool can do for you. Read on for more information about the different types of bankruptcy and what debts they can help with. Arming yourself with this information can be the first step towards a more secure, debt-free future for you to enjoy.
Ask a Bankruptcy Attorney: What Debts Are Wiped Out When You File Bankruptcy?
What Is Bankruptcy?
Just about everybody has heard the term bankruptcy, but the specifics of what it means are not quite as widely known. At its core, bankruptcy is a legal tool that debtors who are struggling to pay down their existing debts can use to get financial relief and start out with a clean slate.
While it is a powerful tool that can be greatly beneficial to those struggling with debts they can no longer keep up with, bankruptcy is not a process that should be undertaken lightly. Take advantage of the information below as well as advice from a trusted bankruptcy attorney to ensure that you're taking the best possible steps for your financial future.
When Is Bankruptcy a Good Option?
Because it is such a drastic step, there is often a stigma associated with going into bankruptcy. It is often seen as an absolute last-resort option because of the lasting consequences this process can have. However, if you're faced with debts that you can no longer make payments on, the lifeline that bankruptcy provides can be instrumental in getting to more stable financial ground.
One common example of a situation where bankruptcy can be beneficial is if you have incurred credit card debt that you can no longer pay off. Chapter 7 bankruptcy can be beneficial in this case, with a chance to completely discharge those debts so that you can spend the money where it is more needed.
What Are the Benefits of Declaring Bankruptcy?
One immediate benefit of declaring bankruptcy that can instantly improve your quality of life is the protection it provides from your creditors harassing you for payments. Once you've filed for any kind of bankruptcy, an automatic stay is put in place that prevents creditors from collecting debts in any way, including through wage garnishments.
In addition to this short-term benefit, bankruptcy also provides you with long-term relief from the outstanding debts that have piled up to an insurmountable point. Depending on the type of debt and the type of bankruptcy you file, you can see debts wiped out entirely or paid through structured payment plans that are much more manageable. Use the information below and consult with a bankruptcy attorney for more information on what debts bankruptcy can settle.
What Bankruptcy Options Are Available?
There are two common forms of bankruptcy that debtors make use of to get the relief they're seeking. The most common form of bankruptcy is Chapter 7 bankruptcy. This tool gives you a fresh start financially, eliminating most of your debts so that you can get a fresh start. This form of bankruptcy comes with a means test that takes your financial situation into account to see if you qualify.
The other commonly-used form of bankruptcy is called Chapter 13 bankruptcy. Rather than entirely discharging debts, this tool creates manageable repayment plans overseen by a bankruptcy trustee. This may be a good option if you have too much income to qualify for Chapter 7 bankruptcy or for certain types of debt that Chapter 13 bankruptcy can assist with, as well as other certain situations.
What Debts Will Be Discharged by Bankruptcy?
Most types of debt can be alleviated by filing Chapter 7 bankruptcy. Perhaps the most common form of debt, credit card debt, is one example of a debt that can be resolved through bankruptcy. Other dischargeable debts include medical bills, phone or other utility bills, judgements that resulted from unpaid debts, or personal loan debts.
Other debts can be absolved in some situations depending on the specific circumstances that you're faced with. This includes tax debt that is older than three years for returns that were filed on time but have gone unpaid since. Student loans are another type of debt that can be assisted by bankruptcy, but only if undue hardship can be proven during your bankruptcy proceedings.
What Debts Will Not Be Discharged by Bankruptcy?
While bankruptcy is a powerful tool at the disposal of any debtor struggling to make payments, it will not be a solution for every type of debt. For example, as covered above, student loan debt is not dischargeable in most situations unless a certain level of hardship resulting from the debts can be proven. Cases where you owe legal expenses resulting from a personal injury caused by you operating a vehicle under the influence will also not be discharged.
Other forms of debt that won't be resolved by Chapter 7 bankruptcy include taxes from the last three years and other money that you owe to the government. You also won't be able to discharge outstanding alimony or child support payments, as well as any debts that you've incurred that relate to a divorce proceeding.
What Debts Can Chapter 13 Bankruptcy Assist With?
Although Chapter 7 bankruptcy is the more commonly-used option and comes with the benefit of completely discharging debts, there are certain debts that Chapter 13 bankruptcy is better suited to assist with. If you need assistance with these types of debt, it may be beneficial to seek Chapter 13 bankruptcy even if you qualify for Chapter 7 bankruptcy as well.
There are a number of specific cases where Chapter 13 bankruptcy can apply, so it is hard to cover every case. One example is for debt related to a divorce proceeding. If you have outstanding payments to make towards a property settlement, for example, Chapter 13 bankruptcy can set up a more manageable payment plan to pay that debt down with.
How Do I Begin the Bankruptcy Process?
With all the complexities that go into the bankruptcy process, it isn't an undertaking that you should face alone. Getting the right assistance ensures that you have proper guidance and helps you make the right choices at every step of this important financial process. That's why the crucial first step before taking any action regarding bankruptcy is getting a consultation from a trusted bankruptcy attorney.
If you want a proven team on your side during this important process, our team can provide you with the assistance that you're searching for. We'll provide you with detailed information at every point of the bankruptcy procedure so that you always have the assurance that comes from your legal matters being in safe hands. Schedule a free consultation with the Thomas K. McKnight Law Office today and get started on your path to a better financial future.