Bankruptcy can be a complicated and often misunderstood process. So many people get confused and misfile their bankruptcy case or they can even miss debts. This could lead to the dismissal of your case, or it could cause you to pay more after your case is finalized than you truly have to. Here are some things you should know to help you understand what debts bankruptcy can fix.
Do You Know What Debts Bankruptcy Can Fix?
There are two chapters of bankruptcy that most consumers use when handling their out of control debts—Chapter 7 and Chapter 13. If you file the wrong one, then many of your debts could go unaddressed, which could leave you paying creditors just as much after bankruptcy as you did before. Understanding the differences in these filings can help you avoid just such a scenario.
- Chapter 7 – This filing can help you dismiss unsecured debts like credit cards, medical bills, and even past due utility bills. Debts like these are generally called unsecured debts because they are not secured by collateral or a lien. Debts that are secured are harder to have dismissed because the creditor can still repossess the property or asset that secured the loan. However, there are still other way to address these debt issues.
Chapter 13 – This filing doesn’t completely eliminate debt; however, it can stop foreclosure and repossession (something Chapter 7 cannot do). Chapter 13 reorganizes and reduces debt into a manageable payment plan, at the end of which, discharges certain debts. If you owe more on an asset, like property or a car, than what it is worth, you can negotiate to lower that debt. You can also use Chapter 13 to lower or discharge some of your tax debts, which Chapter 7 cannot do.
- Debts Bankruptcy Cannot Discharge – Though bankruptcy is very robust, there are some debts that the process cannot eliminate. If you have received a fine for violating the law, or you have to pay criminal restitution, those penalties cannot be eliminated. Any debts caused by injuries or death related to you driving while intoxicated are also non-dischargeable. Another detail that can make your divorce less effective, is forgetting to list a debt in your bankruptcy papers.
The bankruptcy process is effective at helping you get control of your debt, but the filings, hearings and negotiations can make it hard to handle. That’s why it’s important to have a bankruptcy attorney in your court. An attorney has the experience to help you file under the proper chapter, and they know which debts can be dismissed under each filing. This could help ensure that your bankruptcy is effective, so you can get your life back on track.