What Bankruptcy Will Not DoThough 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 be proven.
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 debts.
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 future.
Debtors should take into considerations these potential limitations on debt reduction when filing with the bankruptcy court.
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