What won’t bankruptcy do for me

Bankruptcy can be an effective solution for many debt-related problems but is not a universal fix for every financial challenge. It may not always be the best choice for every client. To make an informed decision, take advantage of our firm’s free consultation with experienced AZ bankruptcy attorneys. A personalized debt evaluation will help you explore your options and determine if bankruptcy aligns with your financial goals.

While bankruptcy can discharge certain debts, it does not apply to all types of obligations. For instance, debts like student loans, back child support, alimony payments, and most tax liabilities cannot typically be eliminated.

What Types Of Debts Are Excluded From Bankruptcy?

While bankruptcy is an effective tool for eliminating many kinds of debt, certain obligations are excluded and remain your responsibility even after the process is complete. These include legal and financial commitments deemed non-dischargeable under bankruptcy laws.

For instance, student loans are notoriously difficult to discharge and typically require proving undue hardship—a standard that’s rarely met. Similarly, court-ordered payments such as child or spousal support, as well as most tax debts, are categorized as priority obligations and are not affected by bankruptcy.

Criminal penalties, including restitution and fines related to DUI convictions or other offenses, are also not subject to discharge. It’s important to understand these exceptions to avoid surprises during the bankruptcy process. Consulting with a knowledgeable attorney ensures you have a clear understanding of which debts can and cannot be resolved through bankruptcy.

Will Bankruptcy Clear Tax Debts Or Other Government-Related Obligations?

Tax debts are challenging to discharge under bankruptcy laws. Only specific types of older tax debts may qualify under strict conditions, such as income taxes that are at least three years old, filed on time, and do not involve fraud.

However, most recent tax liabilities, payroll taxes, and penalties are not dischargeable. Additionally, debts related to government obligations, like fines or penalties for breaking the law, cannot be eliminated. This includes traffic tickets, criminal restitution, and court fines.

It’s important to note that even if certain tax debts are discharged, tax liens filed by the government before your bankruptcy will remain attached to your property. These limitations mean you may still have financial obligations to federal, state, or local governments after your bankruptcy case is resolved.

Can Bankruptcy Stop Foreclosure Or Repossession Permanently?

Bankruptcy can temporarily halt foreclosure or repossession through an automatic stay, which immediately stops creditors from pursuing collection actions. However, this relief is temporary.

For secured debts like a mortgage or car loan, bankruptcy doesn’t eliminate the creditor’s right to seize the collateral if payments remain unpaid. For instance, if you file for Chapter 7 bankruptcy, your personal obligation to pay the debt may be discharged, but the lien on the property remains. This means the lender can still foreclose on your home or repossess your car after the bankruptcy process if you can’t catch up on payments.

In Chapter 13 bankruptcy, you might be able to keep your property by restructuring your debt, but only if you can adhere to the repayment plan. Bankruptcy isn’t a permanent fix for secured debts.

Will Bankruptcy Remove Legal Obligations From Divorce Settlements?

Bankruptcy typically does not remove legal obligations stemming from divorce settlements. Debts like child support, alimony, and other court-ordered payments are considered priority debts and cannot be discharged under bankruptcy laws. Even property division agreements outlined in a divorce decree are often not dischargeable in Chapter 7 bankruptcy, though Chapter 13 may allow some restructuring.

For example, if you agreed to take responsibility for a joint debt during the divorce, creditors can still pursue you for repayment despite bankruptcy. Additionally, filing for bankruptcy won’t override the terms of a divorce settlement or modify ongoing financial responsibilities. It’s essential to consult Arizona bankruptcy lawyers and a family law expert to understand how bankruptcy may intersect with your divorce obligations.

Take Action Today

If you need more help with bankruptcy, contact us at Chapter Bankruptcy Lawyers. We will offer proper assistance to help you get a fresh start with your finances. Call us now!