Bankruptcy is meant to alleviate or eliminate debt for those whose finances are unmanageable. There is a common misconception that bankruptcy will eliminate all debt, eliminating financial responsibility for the person filing, but this is not true. Depending on which type of bankruptcy you qualify for, some or all of your debt (in a limited number of cases) may still have to be repaid. It’s important to speak with a reputable Utah bankruptcy attorney before you begin proceedings to make sure filing for bankruptcy will have the desired result in your specific situation.
Sometimes people seeking to file for bankruptcy are not in as bad of a financial situation as they originally thought. Some creditors will continue trying to collect on a debt that is too old to be collected on, placing undue financial pressure on the debtor. Carefully reviewing your credit report will help you to determine if there are any old debts that can be eliminated. You will also be able to see if there are mistakes or fraudulent accounts that can be deleted to improve your financial situation without filing for bankruptcy.
Most people assume that all of their debt will be eliminated through bankruptcy proceedings but there are some debts that cannot, such as student loans and unpaid taxes. However, even student loans in extremely limited situations and older personal income taxes can sometimes be eliminated. Child support and spousal support payments will also have to be made, regardless of whether or not you file for bankruptcy. Calculating which payments you will still be responsible for making after your bankruptcy will help you to determine if bankruptcy is the right choice for your situation
There are two main types of personal bankruptcy, Chapter 7 and Chapter 13. Chapter 7 is where debts are completely discharged so the debtor is no longer responsible for repayment. Most property that is still owed on in a Chapter 7 filing can be repossessed if the debtor can’t pay off at least a portion of the principal owed. Chapter 7 has some limitations on who can file, based on income and other factors. Chapter 13 is a restructuring of debt, where interest rates and terms of repayment for certain secured debts can be renegotiated and in most cases very little is paid on unsecured debts to make the debt more manageable. The person filing for this type of bankruptcy may be able to keep most of their property but will have a monthly payment to satisfy the minimal repayment requirements.
Speaking with a Utah bankruptcy attorney and educating yourself on what type of bankruptcy you would qualify for, as well as which of your debts would be discharged, can help you to determine if bankruptcy is your best option. You may find that there are better ways to improve your financial situation than bankruptcy or you may find that bankruptcy will offer you the relief you’ve been looking for.