Understand what bankruptcy can and cannot do with the help of a skilled bankruptcy lawyer

Most people associate bankruptcy with something negative, but it can allow people and companies to start over and rearrange their finances, ultimately assisting them in regaining control over their financial future. We should know what bankruptcy can and cannot do in Phoenix, AZ, or other states in the US to maximize your bankruptcy benefits.

There are many dos and don’ts to consider during the challenging legal bankruptcy procedure. To successfully traverse the complexities of the bankruptcy code, evaluate your options, and develop a strategic plan suited to your financial position, you need to seek the advice of an Arizona bankruptcy attorney

Avoid attempting to conceal assets or engaging in dishonest behavior because doing so could result in harsh legal repercussions. Arizona bankruptcy lawyers, like Phoenix Fresh Start Bankruptcy Attorneys, offer helpful guidance on how to safeguard your assets, plan for exemptions, and lessen bankruptcy effects on your credit and personal finances, all of which can help you achieve the best possible outcome for your financial future.

What are the Common Things Bankruptcy Can Do?

Both Chapter 7 and Chapter 13 bankruptcy offer relief to heavily indebted people, and each has unique benefits and methods for managing debt and property. The decision between them is based on your objectives, resources, and property, all customized to your situation. 

Stop All Creditor Harassment and Other Collection Activities Immediately

The automatic stay is a court order that takes effect immediately upon filing a bankruptcy case. Most creditor calls, wage garnishments, and lawsuits are stopped. However, some activities are not eliminated or halted, such as domestic support payments and criminal cases. 

Temporarily Halt a Foreclosure, Eviction, or Repossession


The automatic stay will temporarily halt any eviction ongoing in court unless—which happens frequently—your landlord has already obtained a judgment of eviction against you.


A foreclosure can be stopped if you are behind on your mortgage payments because of the automatic stay. You cannot keep the property if you file for Chapter 7 bankruptcy. Once the stay is lifted, you will lose the residence if you cannot bring the account current. However, Chapter 13 enables you to make up missed payments to maintain the house.


The automatic stay will also immediately halt any collection or repossession efforts, just like it would in the case of a mortgage. Even if you’re behind on your payments, you must catch up to keep your car in Chapter 7. However, you can include a vehicle arrearage in a Chapter 13 filing to catch up on the payments.

Credit Card Debt and Most Other “Nonpriority” Unsecured Debts Must Be Paid Off

Credit card debt, medical expenses, personal loans, gym memberships, past-due energy bills, and other unsecured debts can all be eliminated through bankruptcy. Because there is no security backing up your pledge to pay, this kind of loan is “unsecured.” Except for student loans, declaring bankruptcy can eliminate most non-priority unsecured debts.

What are the Common Things Bankruptcy Cannot Do?

Remember that bankruptcy cannot eliminate all debt or cure all financial issues, even though it can offer relief from crippling debt and a fresh financial start.

Secured Creditors Might Still Seize Property That You Can’t Afford Even After Filing for Bankruptcy

Debts can be discharged in bankruptcy, but liens are not removed. A lien enables the lender to seize assets, sell them at public auction, and use the proceeds to pay off outstanding debt. Until the obligation is satisfied, the lien remains on the property. Bankruptcy can discharge your debt obligations if it is a secured debt—one for which the creditor has a lien on your property. The creditor can still retrieve the collateral, and the lien will remain on the property. 

Bankruptcy Does Not Discharge Alimony and Child Support Obligations

You will still be obligated to pay child support and alimony in full as if you had never declared bankruptcy because these responsibilities continue during bankruptcy. Additionally, if you file for Chapter 13, you must include payment for all these debts in your plan. 

Bankruptcy Does Not Always Reduce Student Loan Debt

Student loans may be erased from bankruptcy if you demonstrate that repaying a student loan would put you through “undue hardship,” a demanding threshold to meet. You must prove you currently cannot pay your debts, and there is little chance you will be able to do so in the future. 

Most Tax Debts are Not Forgiven by Bankruptcy

Although it is difficult, it is occasionally feasible to discharge previous unpaid tax debts in bankruptcy. 

Other Nondischargeable Obligations are Not Discharged in Bankruptcy

Certain debts (including those omitted from your bankruptcy documents unless the creditor learns of your case), debts resulting from personal injury or death brought on by drunk driving, and fines and punitive penalties (like traffic violations and criminal restitution) are non-dischargeable in both Chapter 7 and Chapter 13 bankruptcies. These debts continue to exist after your case is over in Chapter 7, but they must be fully repaid as part of your Chapter 13 repayment plan.

Fraud-Related Debt Could Be Eliminated 

Bankruptcy won’t discharge a fraud-related debt if a creditor brings a lawsuit, known as an adversary process, and persuades the judge that the debt should remain in bankruptcy. Such debts may be from making false statements on a credit application or misrepresenting your property ownership when applying for a loan and using it as security. 

What are the Common Things Chapters 7 and 13 Bankruptcy Can and Cannot Do?

Below, we summarize what Chapters 7 and 13 bankruptcy can and cannot do:

Chapter 7 

Most unsecured debts, such as credit card and hospital bills, are swiftly discharged under Chapter 7 or “liquidation” bankruptcy. However, it cannot discharge recent tax debts, frequently excludes school loans, and cannot discharge secured debts, such as mortgages, without forfeiting property. Some debts might also not be forgiven due to alimony, child support, and state-specific exemptions, necessitating the sale of assets to pay creditors.

Chapter 13 

Chapter 13 bankruptcy permits a three- to five-year repayment schedule while protecting assets for delayed auto and mortgage payments. It lacks instant debt relief like Chapter 7, cannot remove some property liens, does not discharge child support, alimony, most tax debts, or certain loans, and lowers your credit score.

Call Our Arizona Bankruptcy Lawyers To Help Determine What Bankruptcy Can and Cannot Do in Phoenix, AZ

Our bankruptcy attorneys at Phoenix Fresh Start Bankruptcy Attorneys provide crucial information by assessing your financial circumstances, clarifying bankruptcy kinds and eligibility requirements, and describing which debts can and cannot be dismissed. We will explain how bankruptcy affects your assets and belongings, help with repayment strategies, and offer legal defense against creditor lawsuits. 

Our Arizona bankruptcy lawyers will also guide you through your bankruptcy filing and provide free, no-obligation, stress-free financial analysis for those interested in knowing their bankruptcy cases. We offer other bankruptcy-related services like divorce bankruptcy and wage garnishment

We aim to assist people and organizations in making wise financial decisions, because we want to guide them with long-term financial planning and investigate alternative debt relief options if bankruptcy is not the best option. Contact us today to know more!