What Bankruptcy Will Not Do

While bankruptcy could present relief to debtors from the acts of creditors, get rid of some consumer debts or can lead to the formation of a repayment plan for those debts that must be resolved, at some point leading to a discharge, some things bankruptcy cannot do.

When Creditors have claims against the debtor bankruptcy cannot protect them if  not disclosed with the bankruptcy court when paperwork is filed. That is why, the debtor ought to be certain to make a full disclosure of every creditor however time intensive this may be.

When filing chapter 7, it offers some protection but not a complete fix all solution, as it is a solution that will cause the selling of assets to make good on secured debts. Nonetheless, exceptions can be made with the help from the court and creditors. Chapter 7 is unable to entirely shield the debtor from the claims of creditors. Even after discharge, objections could very well be filed with the court inside the deadline period by creditors or the trustee in the case if concerns regarding disclosure or some sort of irregularity can be proven.

If you have liens on a property, bankruptcy cannot prevent creditors from repossessing the property on secured debts. Foreclosures are stopped by Chapter 13, although the debtor must come up with a repayment plan that allows payments to be made on the existing mortgage and catch ups on payments that were not made previously. In order to do this the debtor is required to give proof of regular income.

If your business is struggling bankruptcy cannot provide an easy fix. Based on the size of the business, small businesses being the exception, a chapter 11 path to bankruptcy may take up to 18 months to file and create a repayment plan. An attorney is highly recommended along with other professionals may be involved. Expenditures will need to be paid at intervals even during the process of filing and preparing the plan.

Generally speaking, certain classes of debt bankruptcy cannot reduce or eliminate. For instance, debts of a personal nature related to child support, spousal support or alimony will not be addressed when discharge occurs and the debtor remains liable for the repayment of these debts. Also, these payments must be part of a repayment plan under chapter 13, and this could result in the plan having to require the extended period of five, as opposed to three years.

Various other debts, for example fines owed to municipal or government bodies, or fines of a criminal nature are not dischargeable. Nor can debts associated with harming or killing someone while intoxicated be discharged as a result of filing bankruptcy. Furthermore, debts linked to fraud persist even after other debts are discharged.

In general, tax debts cannot be eliminated. When this has been accomplished, it has been a complicated, lengthy and expensive process usually related to old tax debts.

Under most circumstances student loans cannot be discharged under the Bankruptcy Code, although you are able to plead hardship. Still, this is not necessarily granted since it is required that the debtor proves inability to pay now and in the future.

These potential limiitations should be considered by debtors for debt reduction as they file with the bankruptcy court.

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Originally posted 2010-05-14 23:01:02. Republished by Blog Post Promoter

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