People who rack up more debt than they can repay ponder whether they should file for bankruptcy or not. Once you end up in a huge financial crisis, you can protect your assets by filing for bankruptcy. But you should always remember that a bankruptcy will remain on your credit record for up to seven years and make it difficult for you to borrow in the future. When you need bankruptcy help and file for it, a court trustee and a judge will examine your liabilities and assets. The court will decide whether to discharge the debts or not. The court can also dismiss the case if it believes that you have enough assets to pay the bills. You can contact Arizona Bankruptcy and Debt Solutions bankruptcy lawyers in Mesa to guide you through the process of filing the bankruptcy case. The bankruptcy lawyers will hold discussions with you, assess your current financial condition, and discuss all the options available for relief from debt.
Both Chapter 13 and chapter 7 bankruptcy allow for the cancellation of many debts, but the processes involved are different. In Chapter 7 bankruptcy, the court appoints a trustee who is authorized to sell your assets, and the funds collected from your assets sale are used to pay your debts. The money might not be enough to pay off your debts, so most of your creditors only receive some percentage of the amount you owe them.
What Debts Will Not Be Discharged?
The undischarged debts in bankruptcy depend on the type of bankruptcy you filed for. There are about nineteen categories of debts that can’t be discharged. These include
Auto Loans
If you have taken a vehicle loan, you can’t include it in a bankruptcy filing. If you file Chapter 7, you will have to surrender the car to the bank. If you don’t want to surrender the car to the bank, you can keep it and continue making the monthly payments. Both the lender and borrower act as if the bankruptcy was never filed. Once the entire loan is paid off, your lien will be released, and you will own the car. In Chapter 13, a car loan can be “crammed down,” but only if you had taken the loan two and a half years ago.
Mortgage
You can’t include your mortgage in bankruptcy as bankruptcy involves surrendering your assets in exchange for releasing your unsecured debts. You’ll continue to make your mortgage payments after and during the bankruptcy. As long as you make your mortgage payments, the lender cannot foreclose.
Alimony Or Child Support
Child support or alimony can’t be discharged in bankruptcy. This is because family support is considered a priority debt. As long as the alimony agreement was made by a child welfare agency or in court, you’ll have to pay the debt even after filing for bankruptcy. This type of debt also needs to be paid back before paying any other debt. Because of this, a bankruptcy trustee might determine the liquidation of non-exempt assets as the best way to collect late child support payments.
- Student Loans
Student Loan is another category of debt that can’t be discharged in bankruptcy. If you want to discharge your student loan in bankruptcy, you will have to file an adversarial proceeding.
- Income Tax
Income tax debts can’t be discharged without a special exemption. If you have income tax debts that you can’t repay, you should consult with an experienced tax attorney before filing for bankruptcy.
- Debts Due To Fraud
If debts were accumulated through fraudulent means, they would be excluded from bankruptcy. One of the most common types of fraud involves using a credit card for buying luxury items within ninety days before filing for bankruptcy.
Debts that get Discharged if the Creditor Doesn’t Object
Some debts will only be discharged if your creditor doesn’t object. If the creditor had received appropriate notice of the bankruptcy case but didn’t object by the deadline, the debt will be discharged forever. But, if a creditor objects timely, the court will decide whether the debt should be discharged or not. Certain debts that you’ll have to pay event after filing for bankruptcy include- debts that arose from malicious and intentional practices or as a result of theft, gambling, embezzlement, or breach of fiduciary duty, or cash advances above $1,000 withdrawn within seventy days of the bankruptcy filing.
While the goal of both Chapter 13 and Chapter 7 bankruptcy is to discharge certain debts so that you can give your life a fresh start, not all debts are eligible for discharge. Few debts won’t be discharged unless you convince the court that you’re unable to pay them.
