Personal Bankruptcy: Are You Free at Last (Of All Debt)?

Personal bankruptcy can be a better way to deal with out-of-control consumer debts like credit cards and personal loans. But it does not eliminate all kinds of debt. You will still owe debts to the federal government, like back taxes and student loans.

You will still owe alimony, child support and other post-divorce settlements. If you've been convicted of a crime or a misdemeanor, you will still owe any fines or restitution payments.

Bankruptcy and Taxes

If you owe any money to the federal, state or municipal government, bankruptcy won't make these debts go away. Government debts are things like taxes, extra tax penalties, and student loans.

Alimony and Child Support Payments in Personal Bankruptcy

When you file for bankruptcy, you still owe alimony and child support. If you file for Chapter 13 (instead of Chapter 7 bankruptcy), you can usually roll past-due child support and alimony into your repayment plan. This stops family court efforts to collect from you, including taking money out of your paycheck.

You might be able to eliminate some other family expenses. For example, if you owe your spouse $20,000 in exchange for your share of the home, you might be able to erase this debt. Your attorney will explain which family expenses you can eliminate and which you still have to pay when you file for personal bankruptcy.

Can a Judgment Be Discharged in Bankruptcy

Prior to the time you file for bankruptcy protection, a creditor might take you to court and get a judgment. This allows the creditor to take additional steps - like garnishing your pay or freezing your bank account - to get the money you owe. Bankruptcy makes judgments of this nature go away.

Almost always, you must pay fines for violations of the law - including criminal fines and traffic tickets. This includes debts for personal injuries caused by driving while intoxicated.

You Can Choose to Reaffirm Certain Debts

Some debtors decide to "reaffirm" some of their loans. Instead of erasing a debt, they make a new agreement with the creditor. This can make sense if you don’t want to lose the collateral, like your car. If you reaffirm your car loan, you keep making payments on your vehicle.

A Personal Bankruptcy Lawyer Can Help

The law surrounding bankruptcy is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a bankruptcy lawyer.

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