Bankruptcy, Can Solve Most But Not All Problems
While bankruptcy may give aid for debtors from the activity of creditors, get rid of some consumer debts or can lead to the creation of a repayment plan for those debts that will have to be resolved, ultimately leading to a discharge, on occastion there are things bankruptcy cannot do.
Bankruptcy cannot protect the debtor from the claims of creditors not disclosed with the bankruptcy court when paperwork is filed. As a result, the debtor ought to be certain to make a detailed disclosure of all creditors however time consuming this can be.
Debtor's assets will not have complete protection under Chapter 7, as it is an approach that causes the selling of assets to make good on secured debts. However, exceptions can be achieved together with the assistance of the court and creditors. Chapter 7 is unable to entirely shield the debtor coming from creditors’ claims. Even after discharge, objections can be filed with the court during the deadline period by creditors or the trustee in the case if issues 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, although the debtor a repayment plan must be prepared that enables payments to be made to the existing mortgage and catch ups on payments that were not made previously. One of the stipulations is that the debtor will have to show regular income.
Struggling businesses cannot expect a quick and easy fix through bankruptcy. Based on the size of the business, small businesses is the exception, a chapter 11 path to bankruptcy may possibly take up to 18 months to file and prepare a repayment plan. A lawyer is strongly recommended and other professionals could be involved. Expenditures will need to be paid at intervals even when the plan is in the process of being filed.
In most cases, certain classes of debt bankruptcy cannot reduce or eliminate. For instance, personal debts such as child support, spousal support or alimony are not resolved when discharge occurs resulting in the debtor's liablity for the repayment of these types of debts. Also, these payments must be part of a repayment plan under chapter 13, and this may lead to the plan having to entail the extended period of five, instead of three years.
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 as a result of filing bankruptcy. In addition, debts related to fraud continue even after other debts are discharged.
In general, tax debts cannot be eliminated. Where this has been accomplished, it has been a complicated, prolonged and costly process typically related to old tax debts.
In most cases student loans cannot be discharged under the Bankruptcy Code, although it is possible to plead hardship. Even so, this is not necessarily granted because it is required that the debtor proves inability to pay now and in the future.
These potential limiitations should be considered by debtors for debt reduction as they file with the bankruptcy court.
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