It's true that there are certain types of debt that can't be discharged in a bankruptcy.
According to Los Angeles Chapter 7 Bankruptcy Lawyer Vincent Howard of HOWARD LAW, these include:
- Student loans;
- Child support and alimony obligations;
- Back taxes (depending on circumstances.
However, if debts like these are your primary problem, that doesn't mean you can't benefit from a bankruptcy.
First of all, a discharge of debts in a Chapter 7 liquidation plan will allow you to shed all of your other debts, including medical bills, credit card payments and personal loans. Taking steps to free yourself of these obligations can make a huge difference in your ability to pay your other debts.
And secondly, even though certain debts must still be paid in full, they can still be lumped into a Chapter 13 reorganization and repayment plan that will allow you to make your payments more manageable. This plan is particularly useful for individuals who may earn too much to qualify for a Chapter 7 under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.
This legislation raised the standards for bankruptcy - and also lumped in privately-funded student loans with those backed by the federal government. Previously, those loans could be discharged in a bankruptcy, but unfortunately no longer.
There are certain avenues of relief for some of these debts if you have a significant hardship, but those are very difficult to obtain. Usually, you have to be in a position where you are permanently disabled or living on a low, fixed income that is unlikely to change.
Usually, it's better to skip the hardship requests and go straight to the bankruptcy, although every situation is different and there are circumstances in which it is certainly worth applying.
Failing to do anything, however, will only make matters worse. For example, if you owe a large sum of child support or back taxes, either the courts or the Internal Revenue Service have the option of garnishing your wages (as do other creditors). In this scenario, you have little power to alter the terms of this.
A bankruptcy gives you some control.
If your major problem is taxes, we may be able to assist you in working out an installment payment plan with the IRS. Generally, these debts have to be paid off in five years or less. Let's say you owe $20,000. This would put your monthly payments at around $330.
If this isn't doable, you might still be able to apply for a longer plan by filing a financial statement through a Form 433-F. Having someone to help you negotiate the terms of this agreement can make a huge difference in your ability to manage this debt.
Filing for a Chapter 13 can be particularly beneficial, however, because it grants you the relief of an automatic stay. This will halt creditor calls and legal proceedings, including foreclosure, to give you enough time to formulate a plan.
So just because your debts are technically dischargeable in a bankruptcy does not mean you can't benefit from filing. If you have questions about how a bankruptcy can help, call us today to schedule a consultation.
Los Angeles Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
Can bankruptcy boost your credit score? Oct. 11, 2012, By Steve Bucci, Bankrate.com
More Blog Entries:
Some Bills Won't Help Re-Establish Your Credit, Oct. 2, 2012, Los Angeles Bankruptcy Lawyer Blog