Many people consider bankruptcy a “magic pill.” They believe that filing for Chapter 7 or Chapter 13 will immediately improve their situation, putting all their financial troubles in the past once and for all
There is no denying the benefits of bankruptcy. For example, you can have most or all of your debt discharged through a Chapter 7 filing. By filing under Chapter 13, you can prevent a foreclosure and get time to repay your back mortgage payments, as well combine other debts into one monthly payment that you can afford.
Even with the many benefits of bankruptcy, you don’t want to get caught thinking that this is the answer to all your problems. There are things that bankruptcy cannot do. You need to understand what can happen by filing, as well as what won’t happen.
Here are a few of the things bankruptcy cannot do for you:
- Eliminate student loan debt. There are circumstances when this debt is discharged in bankruptcy, but they are very few and far between. Generally speaking, student loans will remain after the bankruptcy process comes to an end.
- Wipe out debts such as criminal fines and Court ordered restitution for a criminal act.
- Eliminate alimony and child support obligations. If you owe alimony or child support, you must continue to make payments. The family court does not care if you file for bankruptcy. This does not eliminate these obligations.
Note: if your financial situation has changed and you can no longer afford the same amount of alimony and/or child support, you can request a modification.
- Eliminate all tax debt. Many people are under the impression that bankruptcy allows them to eliminate all tax debt, however, this is not true. It is possible in many cases, but there are a number of rules that apply which you need to discuss with your attorney in your specific situation.
Do you have questions about what bankruptcy can and cannot accomplish for you? If so, contact us to setup a consultation. We can review your situation, answer all your questions, and help you decide what is the best step for you to take.