What Bankruptcy Cannot Do

What Bankruptcy Cannot Do

Bankruptcy is a way for you to officially and publicly declare your inability to deal with
the creditors who have lent you money in the past. Bankruptcy is a great option when
nothing else works, including debt consolidation and other financial techniques.
However, it is always important to remember that bankruptcy is not the easy way out. In
fact, bankruptcy is not a good choice for most people. Many are confused with how
bankruptcy works, and if you do not fully understand it, you should talk to a financial
professional so that you can learn what bankruptcy can and cannot do.

For starters, bankruptcy cannot save your property if you have used it for collateral. For
example, if you have a mortgage, you have promised your lender that if you do not pay
back the loan, you will leave your home and it can be sold by the lender. If you can
declare bankruptcy, that doesn't change. The same goes if you used a car, engagement
ring, or other asset as collateral. What bankruptcy does do is stop the lender from
pursuing more money after they have collected the property in question.

Bankruptcy can get rid of curtain debts, but one thing that it cannot get rid of is child
support payments or alimony obligations. Children will belong to you forever. No
financial institution can rid you of this responsibility, because your financial obligation to
them is for their benefit. Alimony payments are the same way—they survive bankruptcy.
If you file chapter 14 bankruptcy, you will have to include child support and alimony
repayment in full. Anything less is illegal.

Other types of debts that survive bankruptcy are student loans and tax debts in most
circumstances. It depends on your specific financial situation and the efforts you've made
in the past to repay those debts. The court will decide what you will and will not have to
repay in these cases. There are other debts that call in this category, including fines and
penalties given for criminal offenses, traffic ticket bills, debt for personal injury due to
intoxicated driving, and debts that you forgot to include on your bankruptcy list.

Bankruptcy is not easy and it is a not a way to give up your responsibilities. You may be
able to cancel some of your debts this way, but not all of them. You also will have to deal
with bankruptcy well into the future. Before you declare bankruptcy, you should learn
what bankruptcy can and cannot do so that you are well prepared.