Bankruptcy, Can Solve Most But Not All Problems
While bankruptcy may provide aid for debtors from the activity of creditors, do away with some consumer debts or lead to the development 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.
When Creditors have claims against the debtor bankruptcy cannot protect them if not disclosed with the bankruptcy court at filling. For that reason, the debtor ought to be certain to produce a detailed disclosure of every creditor however time consuming this may be.
When filing chapter 7, it offers some protection but not a complete fix all solution, as it is an approach that leads to the selling of assets to make good on secured debts. However, exceptions can be achieved with the assistance of the court and creditors. Chapter 7 is unable to entirely guard the debtor from the claims of creditors. Even with discharge, objections could be filed with the court inside the deadline period by creditors or the trustee in the case if difficulties associated with disclosure or some form 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. Foreclosures are halted by Chapter 13, but the debtor a repayment plan must be put together that permits payments to be made for 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 approach to bankruptcy might take up to 18 months to file and prepare a repayment plan. An attorney is strongly recommended as well as other professionals might be involved. Bills will have to be paid at intervals even during the process of filing and preparing the plan.
In general, certain classes of debt bankruptcy cannot reduce or eliminate. For instance, debts of a personal nature related to 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. Furthermore, under chapter 13 these payments must be part of the repayment plan, and this could result in the plan having to require the extended period of five, as opposed to three years.
Other debts, for example fines owed to municipal or government bodies, or fines of a criminal nature are not dischargeable. Nor can debts associated with hurting or killing a person while intoxicated be discharged as a result of filing bankruptcy. Moreover, debts regarding fraud remain even after other debts are discharged.
Most of the time, tax debts cannot be eliminated. Where this has been achieved, it is often a complicated, prolonged and expensive process usually related to old tax debts.
Under most circumstances student loans cannot be discharged under the Bankruptcy Code, although it is possible 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.
Debtors should take into considerations these potential limitations on debt reduction when filing with the bankruptcy court.
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