Bankruptcy Law

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Debts That Usually Remain After Bankruptcy

The decision about whether to file bankruptcy is a difficult to decision to make. Will it discharge my student loans? Will I still have to pay off unpaid child support? These are common questions.

People often worry about the lasting effects on their credit history and their ability to borrow money in the future. However, sometimes the advantage of being relieved of debt in a bankruptcy proceeding outweighs the disadvantages. In order to weigh the advantages and disadvantages for yourself, it is important to understand exactly what debts bankruptcy gets rid of for you and which debts will remain your responsibility.

Individuals may file for bankruptcy pursuant to Chapter 7 or Chapter 13 of the United States Bankruptcy Code. Chapter 7 bankruptcy requires the sale of the debtor’s nonexempt property and the distribution of the proceeds to the debtor’s creditors. Chapter 13 bankruptcy allows debtors with a regular income to keep their property and to come up with a debt repayment plan to satisfy debts over the course of 3 -5 years.

While most debts are satisfied in a Chapter 7 or Chapter 13 bankruptcy discharge, there are certain debts that are likely to remain with the debtor following bankruptcy discharge including:

  • Alimony and child support debt for past amounts that have not been paid;
  • Taxes: unpaid taxes usually remain with debtors after a bankruptcy is discharged;
  • Government funded or guaranteed educational loans: are not discharged in bankruptcy proceedings;
  • Debts associated with a criminal sentence: debtors who are ordered to pay restitution in certain criminal cases must still pay those debts after an individual bankruptcy discharge;
  • Debts incurred in some drunk driving lawsuits: a debtor who injured or killed someone while driving under the influence of alcohol (DUI or DWI) remains responsible for any financial damages awarded to a plaintiff in a lawsuit arising from the incident;
  • Mortgages: long term obligations such as mortgages may not be discharged in a Chapter 13 bankruptcy proceeding; and
  • Secured Debts that have been reaffirmed in a Chapter 7 bankruptcy proceeding remain the debt liability of the debtors.

The degree to which bankruptcy gives a debtor a fresh financial start depends on an individual’s specific debts. If most of the individual’s debts are government backed educational loans and unpaid taxes, for example, then bankruptcy will not relieve the debtor of his or her obligations.

A Bankruptcy Attorney Can Help a Debtor Achieve a Fresh Start

An experienced bankruptcy attorney will review all of an individual’s debts before filing a bankruptcy petition in order to advise a bankruptcy petitioner about which debts are likely to be discharged in bankruptcy and which debts will remain the responsibility of the debtor after bankruptcy. A bankruptcy attorney may be able to renegotiate debts that would ordinarily not be discharged or help a bankruptcy petitioner set up feasible repayment plans so that the remaining debt is not overwhelming.

For all of these reasons, it is important to contact an experienced bankruptcy attorney to discuss your options and to make sure that a bankruptcy will provide you with the fresh start which you are seeking by relieving most, if not all, of your debt.

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