What Bankruptcy Can and Cannot Do for You

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When you’re in debt over your head, bankruptcy may be the best option. In many ways, filing for Chapter 7 or Chapter 13 bankruptcy can give you a fresh financial start. Although it affects your credit and you may need to give up some of your assets, it also allows you to discharge many types of debt.

It isn’t a magic bullet, however—there are certain types of debt that cannot be discharged. Here’s a brief overview of what you can expect from filing. As always, talk to an attorney for specific advice for your case.

What Bankruptcy Can Do

Filing for bankruptcy will accomplish the following:

  • Temporarily stop eviction or foreclosure: As long as your eviction or foreclosure is still in progress, filing may give you a little extra time. You may be able to bring your accounts current under a Chapter 13 payment plan.
  • Keep creditors from harassing you: Once you file, creditors must immediately stop harassing you.
  • Discharge secured debt by giving up the asset: If you have secured debt (mortgages and car loans are two common types), you may get rid of your debt by giving up your car, home or other property to wipe out the debt.
  • Discharge unsecured debt: Bankruptcy allows you to wipe out unsecured debt, such as utility bills, credit card debt and more.

Depending on the type of bankruptcy for which you file, you may be entitled to additional benefits. These include keeping certain assets that aren’t protected under exemptions when you file for Chapter 13.

What Bankruptcy Can’t Do

There are certain types of debt that bankruptcy does not wipe out. Most tax debts, child support, spousal support and student loans will not be discharged. There are limited exceptions in each case, of course—your attorney will let you know whether you may qualify for one of them. Furthermore, if you fail to list a debt in your bankruptcy filing, or your debt is related to fraud, you may not be able to wipe it out.

Finally, bankruptcy can’t help you keep assets you can’t afford. For example, Chapter 13 allows debtors to keep their houses as long as they keep up with their payment plan—and current payments. If you’re unable to afford both your payment plan and the past-due amount, the bank can foreclose.

For help filing for bankruptcy, call Dworken & Bernstein today.

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