23 Jun What Bankruptcy Can and Can’t Do
Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
- Sometimes, bankruptcy can allow time for a loan modification to go into effect, or to allow for a modification of your mortgage.
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe
- Sometimes it can eliminate second and third mortgages on your home.
Bankruptcy cannot, however, cure every financial problem. And it is not always the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of “secured” creditors. A creditor is “secured” if they have the right to take back property if a loan is not paid. Secured loans are secured by deeds of trust or other liens on property. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money on the debt if you decide to give back the property. It can also sometimes reduce the interest rate or even the total amount of the loan. But you generally cannot keep secured property unless you continue to pay the debt.
- Change the amount due or the interest rate on a home mortgage.
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines, and most taxes.
- Eliminate the debts of cosigners. Although collection activity will temporarily stop during a Chapter 13, when a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
- Discharge debts that arise after bankruptcy has been filed.
Call us at 919-313-4636 to se up an appointment to talk about whether a Chapter 13 or Chapter 7 bankruptcy might offer the solution you are looking for.