Filing Bankruptcy Won't Get Rid of All Your Debts
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by: PamellaNeely
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Bankruptcy is an official, legal declaration of a debtor's inability to pay off large amounts of debt. When you declare bankruptcy, the bankruptcy court will clear view of all responsibility for the debts which are illegally dischargeable. There are two kinds of bankruptcy available to debtors in the United States - Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy is the most common kind of bankruptcy in United States. The best benefit of Chapter 7 bankruptcy and site all dischargeable deaths are immediately wiped out -- you don't have to wait or pay off any remaining debts (at least the ones that are legally dischargable).
In Chapter 13 bankruptcy, the debtor will have a repayment plan so that they can pay off all their debts over a period of time. Some debts may be erased immediately, but this doesn't always happen. One major advantage of Chapter 13 bankruptcy over Chapter 7 bankruptcy is that the debtor may be allowed to hold on to some assets which would have been otherwise liquidated under Chapter 7.
Don't think chapter 13 bankruptcy is a complete easy street. However, here are a few examples of the kinds of debts which can only be cleared under Chapter 13 bankruptcy -Debts from a divorce or settlement agreement -Court fees -Home Owners Association, condominium, or coop fees -Retirement plan loans -Non dischargeable tax debts -Debts from a previous bankruptcy
Not all of your debts will be erased under either Chapter 13 or Chapter 7 bankruptcy. The following debts cannot be discharged under any kind of bankruptcy: - Alimony, child support, and other domestic support obligations - Student loans, except in extreme cases of "undue hardship" - Criminal penalties, and any debts you incurred as a result of committing fraud or other illegal or "malicious" acts
Income tax debts can be discharged, but only under certain circumstances. The restrictions include, but are not limited to that you have to have filed a tax return for the year you owed the taxes, and the tax debt must be from a tax return filed at least two years before your bankruptcy filing.
Bankruptcy filings require that the debtor report all creditors and their addresses; debts which are not listed cannot be discharged. If the creditor has moved without providing a forwarding address, or the notice is lost in the mail or notice cannot be sent for any reason out of the debtor's control, the debt will be wiped away as long as it is legally dischargeable. However, debts which cannot be assessed for reasons which are under the debtor's control (e.g. the debt is not listed or the address given is incorrect) may not be discharged.
Filing bankruptcy doesn't mean that your financial life is over. you may still have liens on your house, but at least now no one will be a double to garnish your wages or access your bank account. Do expect to have difficulty getting loans. Cash is going to be your best friend for the next few years.
While filing for bankruptcy can relieve one of the burdens of debt, a debtor must do his or her due diligence to make sure that all dischargeable debts are, in fact, discharged and to know which debts cannot be discharged. Though a person sometimes must file for bankruptcy because of medical bills or other forces beyond their control, remember that you control what becomes of your life after bankruptcy.
About the Author
Pamella Neely writes about how to decide whether or not to file bankruptcy.
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