Bankruptcy is a highly beneficial tool that helps individuals and business owners alike mitigate their inability to remain up-to-date on their monthly payments. Although it does not eliminate all debt, the primary purpose of bankruptcy is to help debtors regain their financial footing.
Prior to filing for bankruptcy, however, it is important to know what it can and cannot do.
What Bankruptcy Can Do
- It can eliminate all unsecured debt, including credit cards, personal loans, medical debt, and certain business debt.
- It can prevent harassment from creditors through a court-ordered “automatic stay.”
- It can eliminate certain creditors’ liens on your property, preventing them from repossessing it in lieu of payment.
- It allows you to catch up on your past due car or mortgage payments.
- In some cases, it allows a loan modification to take place.
What Bankruptcy Can’t Do
Debts that cannot be wiped out in bankruptcy include the following:
- Child support and alimony
- Court-ordered restitution
- DUI-related car accident
- Ex-spouse legal fees
- Income tax liability
- Secure debt
- Student loans
What Only Chapter 13 Bankruptcy Can Do
- It can stop a mortgage foreclosure by forcing the creditor to accept a reimbursement plan for missed payments.
- It can prevent you from losing non-exempt property, as you are demonstrating an ability to repay the debts.
- It can help reduce debt to an equivalent of the property’s replacement value and utilize a repayment plan to pay off the lower amount.
Will Bankruptcy Hurt My Credit?
Bankruptcy has been known to lower credit scores for up to 10 years. However, the alternative is damaging your credit score indefinitely and losing your property in the process.
Can You Stop Foreclosure with Chapter 7?
No, it cannot. However, it can delay a foreclosure until other debts have been eliminated, so that sufficient funds are available for mortgage payments.
Contact Sheppard Law Offices Today
Do you still have concerns about bankruptcy? Or, perhaps you have already encountered problems but are unsure of how to proceed? If so, we urge you to (877) 505-9455. Tax and bankruptcy attorney Kenneth L. Sheppard, Jr. is here to help.