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How can bankruptcy solve your debt problem?

Note: The contents of this article relate to the US Bankruptcy system.

Bankruptcy helps in the process of discharging your unsecured debts. But there are few debts like child maintenance, alimony, tax debts and secured loans are not easy to eradicate even after filing bankruptcy.

What are the debts that can be eliminated after filing bankruptcy?

You might be liberated from credit card debt if you file under chapter 7 or 13 bankruptcy as it comes under unsecured debts. You need to repay a partial amount of your unsecured debt under chapter13 bankruptcy. Your nonexempt property would be sold off and the cash would be disbursed among the lenders under chapter 7 bankruptcy. Your unsecured debts would be discharged with the completion on the repayment program.

Under bankruptcy the following debts are not discharged:

Filing for bankruptcy to discharge child maintenance or alimony would be a wrong choice. Only a partial amount of debt would be discharged on filing bankruptcy if you are thinking of avoiding tax debt and student’s loan.  Student loan can also be discharged as there are exceptions otherwise you have to pay off the debt even after filing bankruptcy. If you can provide evidences that the amount owed by you are too high to pay off and you are coming across “undue hardship” to repay then bankruptcy can help you to eliminate the student’s loan.  Usually tax debts are not discharged even after filing bankruptcy, but there are exceptions to this rule. But if you file bankruptcy to purge your older income tax debts then it might be discharged.  The property can be reposed by the secured creditors. Filing bankruptcy can purge your debts but it cannot discharge liens. After the creditor sells the property if the amount is not equal to the amount you owed then they would still contact you irrespective of filing bankruptcy.

Elimination of debts that are not discharged:

The debts that are not discharged even after filing under Chapter 7 or Chapter 13 bankruptcy are as follows. Even if the case is over you still need to carry the burden of debt after filing bankruptcy. You need to pay off the debt in full if you file under Chapter 13. If your are still unable to pay off within time span of the court formulated payment plan then you would still owe the obligation. 1) If you have overlooked to enlist your debts in the bankruptcy papers it won’t affect till the creditors are aware of your filing bankruptcy.   2) If the laws are violated the penalty charges that are levied for instance traffic tickets and criminal restitution etc     3) Present income tax debts and all other tax debts.  Even after filing bankruptcy some debts would not be discharged if the judges are influenced by the debt collectors. If you have burdened yourself with fraud by producing fraudulent credit application or in order to loan you use the borrowed property as collateral. You can get relief from debt by filing bankruptcy but your debt won’t be discharged completely. Before you file bankruptcy make sure what kind of debts you have incurred and whether it’s dischargable under bankruptcy or not.