What Bankruptcy Will Not Do
Though bankruptcy can offer relief for debtors from the acts
of creditors, remove some consumer debts or lead to the
formation of a repayment plan for those debts that must be
resolved, eventually leading to a discharge, on occasion
there are things bankruptcy cannot do.
When Creditors have claims against the debtor bankruptcy
cannot protect them if not disclosed to the bankruptcy court
at filling. That is why, the debtor has to be certain to make
a full disclosure of every creditor however time intensive
this may be.
Debtor's assets will not have complete protection under
Chapter 7, as it is a solution that will cause the selling
of assets to settle secured debts. Having said that,
exceptions can be achieved with the support of the court and
creditors. Chapter 7 is unable to totally protect the debtor
coming from the claims of creditors. Even after discharge,
objections may be filed within the court during the deadline
period by creditors or the trustee in the case if troubles
associated with disclosure or some sort of irregularity can
If a creditor has a lien on a property and wants to
repossess the property because of a secured debt, bankruptcy
cannot shield you from this. Chapter 13 halts foreclosures,
but the debtor must put together a repayment plan that
allows payments to be made on the existing mortgage and
catch ups on payments not made before. This requires the
debtor to prove they have a 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 could take up to eighteen months to file and
prepare a repayment plan. A lawyer is strongly recommended
and other professionals could possibly be involved. Bills
will need to be paid at intervals even during the process of
filing and preparing the plan.
Most of the time, certain classes of debt bankruptcy cannot
reduce or eliminate. For instance, personal debts such as
child support, spousal support or alimony will not be
addressed when discharge occurs and the debtor remains
liable for the repayment of these debts. In addition, under
chapter 13 these payments must be part of the repayment
plan, and this could result in the plan having to require
the extended period of five, as opposed to three years.
Various other debts, including fines owed to municipal or
government bodies, or fines of a criminal nature are not
dischargeable. Nor can debts linked to hurting or killing
someone while intoxicated be discharged from filing
bankruptcy. In addition, debts associated with fraud
continue even after other debts are discharged.
Generally speaking, tax debts cannot be eliminated. Where
this has been accomplished, it is often a complicated,
lengthy and expensive process normally related to old tax
In most cases student loans cannot be discharged under the
Bankruptcy Code, although you are able to plead hardship.
Even so, this is not necessarily granted as it is required
that the debtor proves inability to pay now and in the
Debtors should take into considerations these potential
limitations on debt reduction when filing with the
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