Overview of Bankruptcy
Bankruptcy protection is one of the privileges available to Americans who find themselves with financial problems, giving them a reprieve from mountains of debt and harassment from debt collectors. When filing for bankruptcy, the court places an automatic stay. This means that collection agencies cannot push through with any efforts to get you to repay the debt.
When debt gets discharged, you have no more personal liability to the debt. In other words, you’re not legally required to pay the unpaid debt. Bankruptcy discharges are possible if you meet the requirements. A Phoenix bankruptcy lawyer can explain this to you in more detail.
What Debts are Dischargeable?
There are certain criteria a debt has to meet before it can be discharged with the bankruptcy process. The bankruptcy chapter filed determines when it gets discharged. Below, we list down what you should generally expect to get discharged. For your specific case, it’s best to consult with a bankruptcy lawyer when you declare bankruptcy.
Some types of debt that can be discharged when you file bankruptcy under Chapter 7 liquidation bankruptcy are as follows:
- Credit card debt
- Utility bills
- Medical bills
- Unsecured debts
- Dishonored checks
- Some tax penalties
For this chapter, you can expect to have your debts discharged around four months from the date of the filing of the bankruptcy petition.
Here are some examples of debt that can be discharged in a Chapter 13 case, but not in Chapter 7 one:
- Debts incurred for willful and malicious injury to property
- Debts from property settlements in separation or divorce proceedings
- Debts used to pay non-dischargeable tax obligations
In a Chapter 13 case, you receive a discharge after your repayment plan is paid in full, which takes around 3-5 years.
A revised provision in the bankruptcy code gives temporary relief for those with a Chapter 13 reorganization. In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act allows those who have experienced financial hardship to extend their plan for up to seven years.
What Can’t Be Discharged?
Certain kinds of debt are not dischargeable in all types of bankruptcy. Here are the most common examples of debt for which you cannot receive a bankruptcy discharge:
- Tax-related debts
- Most federal student loans
- Debts not included in court filings
- Spousal or child support or alimony
- Debts related to willful and malicious injuries to people or property
- Government fines and penalties
- Debts related to damages or injuries caused when driving while intoxicated
- Some retirement plan loans
- Some condo or cooperative housing fees
Please note that if a debt is secured, the secured creditor can enforce the liens on possessions for debts that are not discharged.
Challenges after bankruptcy
Negative Impact on Credit
Bankruptcy hurts your credit score, appearing on your credit report for almost a decade. After bankruptcy, expect to have difficulty applying for loans and credit. No worries! The road to rebuilding credit and financial security is long, but not impossible. A good way to start getting your credit score up is to find a secured loan or a credit card you can apply for and consistently make your payments.
Some employers might see that you’ve filed for bankruptcy and hold it against you when you’re looking for a job. Take note that if you’re already employed, you cannot be fired for filing bankruptcy
If you need help when declaring bankruptcy, whether it’s paperwork, deciding whether to liquidate your assets or reorganize your debt, or just questions about bankruptcy information, it’s best to talk to an experienced bankruptcy attorney. At Phoenix Fresh Start Bankruptcy Attorneys, we can discuss your options with you and help you get back on track to financial success. Call us today to schedule a free consultation!