A Beginner’s Guide to Bankruptcy
Bankruptcy is a powerful tool that can shield your personal and business assets from debt collectors. Bankruptcy cannot protect all of your assets, some of them will be used to pay off a portion of your debt. Moreover, bankruptcy will not discharge all of your liabilities (debts). Individuals usually file either Chapter 7 or Chapter 13 bankruptcy with the help of a Philadelphia bankruptcy attorney.
What can bankruptcy do for you?
Eliminate Unsecured Debt
Filing bankruptcy under each Chapter will eliminate unsecured debt. “Unsecured” refers to any debt that is not tied to a particular piece of property. Credit cards or personal loans are two common examples of unsecured debt. When a debt is unsecured, the creditor cannot repossess any of your property to satisfy the debt.
Chapter 13 forces debtors to agree on a repayment plan with continued payments for a maximum of five years. Any debts that remain unpaid once the term of years concludes are discharged.
Automatic Stays
Bankruptcy also institutes an automatic stay which prevents collection efforts.
Protect Assets
Under Chapter 7, state and federal law exempt certain property from seizure by creditors. However, bankruptcy cannot eliminate liens. Therefore, any encumbered assets are still subject to liquidation.
Under Chapter 13, the court imposes a repayment plan that permits the borrower to repay missed payments. Moreover, Chapter 13 does not require the debtor to sell his assets to pay the liabilities so that you can keep more of your assets.
Reduce Secured Debt
Secured debts, unlike unsecured, are tied to a particular piece of property, usually with a lien. A debtor is “underwater” when the value of the asset is less than the liability owed on the property. Chapter 13 allows the debtor to reduce the debt partially and repay the remainder.
What Bankruptcy Cannot Do
Eliminate Tax Debt
Usually debtors cannot discharge recent tax debts in bankruptcy. However, under Chapter 13, some tax debts can be eliminated, depending on the timing, type, and amount of the debt.
Eliminate Support Obligations
Bankruptcy cannot eliminate back-owed child or spousal support.
Eliminate Student Loan Debt
Most student loan debt is not dischargeable except under some narrow circumstances.
Ask Alfred Abel Law Offices About Bankruptcy
Numerous rules govern what debts are dischargeable and when. The bankruptcy attorneys at Alfred Abel Law Offices based in Philadelphia can guide you through the process and help craft a repayment plan for you. Contact our law offices today!
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