When To Look For Bankruptcy Alternatives

Though bankruptcy can provide relief to debtors from the actions of creditors, remove some consumer debts or can lead to the creation of a repayment plan for those debts that must be resolved, eventually leading to a discharge, there are some things bankruptcy cannot do.

Bankruptcy cannot protect the debtor from the claims of creditors not disclosed to the bankruptcy court at filling. That is why, the debtor has to be certain to produce a full disclosure of all creditors however time consuming this might be.

Debtor’s assets will not have complete protection under Chapter 7, as it is a solution that leads to the selling of assets to make good on secured debts. Having said that, exceptions can be made with the support from the court and creditors. Chapter 7 is not able to entirely shield the debtor out of creditors’ claims. Even with discharge, objections could be filed within 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.

Bankruptcy cannot prevent creditors with secured debts, such as liens on property, from repossessing the property. Chapter 13 stops foreclosures, however the debtor a repayment plan must be prepared that permits payments to be made to the existing mortgage and catch ups on payments not made before. One of the stipulations is that the debtor will have to show 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 might take up to eighteen months to file and make a repayment plan. An attorney is strongly recommended as well as other professionals might be involved. Expenses will likely need to be paid at intervals even during the process of filing and preparing the plan.

In most cases, certain classes of debt bankruptcy cannot reduce or eliminate. For example, personal debts such as child support, spousal support or alimony will not be resolved when discharge occurs resulting in the debtor’s liablity for the repayment of these types of debts. In addition, these payments must be part of a repayment plan under chapter 13, and this could result in the plan having to involve the longer period of five, rather than three years.

Other debts, for instance fines owed to municipal or government bodies, or fines of a criminal nature cannot be discharged. Nor can debts related to hurting or killing someone while intoxicated be discharged as a result of filing bankruptcy. In addition, debts related to fraud persist even after other debts are discharged.

In most cases, it is not likely that tax debts can be eliminated. When this has been accomplished, it is often a complex, prolonged and costly process normally related to old tax debts.

Under most circumstances student loans cannot be discharged under the Bankruptcy Code, although you are able to plead hardship. However, this is not necessarily granted as 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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