Bankruptcy is not a be-all-end-all solution to debt, although it can help tremendously. As you consider whether bankruptcy is right for you, you should be aware of how different types of debt are treated during bankruptcy, and what filing for bankruptcy can and cannot do to get you back on your feet.
- Eliminate unsecured debts. An unsecured debt is a debt where the creditor has no lien on your property, and thus cannot repossess your things. Some common categories of unsecured debts are credit card charges, collection agency accounts, medical bills, past due utilities, business debts and personal loans. Bankruptcy is designed to remove these types of debts.
- End harassment by creditors. All of those annoying phone calls and letters will cease when you declare bankruptcy. Even if the harassment is severe (your car is being repossessed, for example), you can halt the proceedings with an automatic stay by declaring bankruptcy.
- Stop secured creditors from repossessing your property.
- End child support or spousal support payments. These debts are immune to bankruptcy and must be paid in full.
- Discharge most student loans, except in unique circumstances where repaying the loan would cause you undue hardship.
- Discharge most tax debts.
Bankruptcy can be complicated, but it does not have to be painful. Speaking with an experienced bankruptcy attorney can help you determine whether bankruptcy is the right choice for you.
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