When an individual is facing overwhelming debt and is unable to repay due to financial hardships, filing for bankruptcy may allow for repayment relief. The two most common types of bankruptcy filings include:
- A Chapter 7 bankruptcy filing discharges all debts completely. With a Chapter 7 filing, an individual may choose to keep a home or car and continue to make payments according to their financial commitments.
- In a Chapter 13 bankruptcy filing, one agrees to pay his/her debts through a repayment plan. This plan may reduce the amount of interest someone owes over time.
After making a bankruptcy filing, there is an “automatic stay” in effect for the individual filing. During an automatic stay, creditors legally, cannot repossess an automobile, foreclose on a home, garnish employment wages or evict an individual from his / her home.
Filing for bankruptcy can ease an individual’s financial burden by eliminating overwhelming credit card debt, helping an individual reorganize debts according to financial standing and provide general relief during a period of financial crisis.
Not all debt can be discharged (forgiven) in a bankruptcy.
The following is a list of debts that cannot be discharged in a bankruptcy:
- Certain types of taxes, custom duties, or debts to pay taxes or custom duties.
- Student loans (unless it would create an undue hardship for the consumer).
- Debts owed for spousal or child support.
- Debts owed to the spouse, former spouse, or child in a domestic relations proceeding.
- Debts arising from a previous bankruptcy wherein discharge of that particular debt was waived.
- Debts owed for money, property, services, extension-or-removal, or refinancing of credit, if obtained by false pretenses, or false representations, or actual fraud.
- Consumer debts for luxury goods obtained within ninety (90) days of the date of filing of the bankruptcy petition.
- Cash advances obtained within seventy (70) days of the date of the filing of the bankruptcy petition.
- Debts owed for fraud or defalcation while acting in a fiduciary capacity, or embezzlement or larceny.
- Debts owed for fines, penalties, or forfeitures payable to and for the benefit of governmental entity.
- Debts owed for death or personal injury arising from the operation of a motor vehicle, boat, or aircraft while intoxicated by drugs or alcohol.
- Debts arising from condo fees and assessments which accrue after discharge.