Bankruptcy is a last resort option that individuals struggling with debt may choose to claim in order to remove substantial amounts of debt they are unable to pay from their record. This damages credit scores that may be necessary to purchase a car, home, or take out loans later in life. When declaring bankruptcy through Chapter 7 and 13, it is possible to wipe out credit card and other unsecured debts. Unsecured debts are when the creditor does not have access to your property and therefore cannot repossess valuables when debt is not paid. When filing for Chapter 13 bankruptcy instead of Chapter 7, you may be responsible for paying partial debt before the rest is discharged.
One of the main functions of bankruptcy involves the stopping of creditor harassment and their claim of liens. A lien is the right a creditor has to take valuable items from a debtor when they fail to repay the money they owe. This is important when creditors are threatening to foreclose on your mortgage or repossess the vehicle you rely on for transportation to work or school. According to the website of attorneys at Gagnon, Peacock & Vereeke, P.C., discharging and restructuring debt through bankruptcy may also protect our small business from creditors and employees from losing wages.
Unfortunately, bankruptcy may not remove secured debt or the right of secured creditors from repossessing property they are entitled to. Other obligations that will not be eliminated through debt include child support payments and alimony. When using Chapter 13, the plan to repay debt will include paying late child support and alimony payments in full. Bankruptcy also does not discharge almost any student loans or tax debts.
The process of declaring bankruptcy is a serious financial and legal decision that required extensive planning and forethought. If you or a loved one is considering bankruptcy, consult an experienced bankruptcy attorney in your area. A knowledgeable lawyer will be able to help you discover the most beneficial course of action for your situation.