Many people in today’s political and financial climate seek relief from overwhelming debt and financial difficulties. For some, this means an overhaul of their spending habits. For others, it could mean reconsidering lifestyle or career choices. And for others, bankruptcy offers the fresh start they seek, but will filing bankruptcy wipe out all your debt?
What is Bankruptcy?
Bankruptcy is a federal legal proceeding. Bankruptcy proceedings help debtors overwhelmed by financial difficulties. Bankruptcy starts when a bankruptcy petitioner files a petition. Any debts incurred before filing a petition are prepetition debts included in the bankruptcy filing.
Immediately After Filing Bankruptcy:
Typically, the automatic stay goes into effect upon filing a bankruptcy petition. The automatic stay prevents creditors from taking action to collect on a debt owed by the bankruptcy petitioner. The stay is to give a debtor a pause to catch his breath and give him a time of no harassment. He is then able to address his debt under court supervision. The automatic stay applies to all debt with few exceptions.
What Are Dischargeable Debts and Non-dischargeable Debts?
Differentiating between dischargeable and non-dischargeable debts is a very confusing issue. This field is too complicated for most laypersons and many lawyers to figure out. We frequently give second opinions and are hired to assist where a case has gotten off on the wrong foot due to the complicated area of dischargeability. It takes a lawyer with lots of experience to discern the range of available options.
The simple part is understanding that while some debt can be wiped out, other debts can not. A discharge means that the debt is no longer collectable. Dischargeable debt is a category of debt that may be eligible for a bankruptcy discharge. Think of a discharge like a court order forgiving the debt. You are no longer legally required to pay that debt! However, the confusing issue is identifying non-dischargeable debts and knowing how to maneuver within a case to obtain a discharge. There is:
- Non-dischargeable debt in Chapter 7 that is always non-dischargeable;
- There is non-dischargeable debt in Chapter 7 that will be discharged unless the creditor takes special adversarial action to prevent the discharge of the debt;
- There is Chapter 7 non-dischargeable debt that may be discharged in Chapter 13. However, that same debt might not be dischargeable depending upon the type of Chapter 13 discharge obtained. (Yes, there are different types of Chapter 13 discharges and different effects of Chapter 13 discharges depending on various circumstances).
The reader should be thoroughly confused by now. This material has volumes of litigation. Only a very well-read attorney should be addressing these issues when they arise.
Considering an Example of Non-Dischargeable Debt:
Different types of debt are typically non-dischargeable. Even after receiving a bankruptcy discharge, a debtor will still owe a nondischargeable debt. One example of a nondischargeable debt is back child support. Although a child support debt arrearage debt may not be discharged, it may still be able to become much more manageable in a bankruptcy. For example, a Chapter 13 plan might enable a debtor to catch up on the child support arrearages while getting back on his feet. When filing bankruptcy, it’s also important to know that bankruptcy does not relieve a petitioner of the need to pay the future ongoing child support that comes due while the bankruptcy is in process. Failure to pay the continuing obligation may result in case dismissal. The dismissal lifts the debtor’s protection under the automatic stay, and creditors may resume their collection activities.
If you need help filing bankruptcy, or if you have questions about which debts are dischargeable and nondischargeable, call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney, and ask about getting a fresh financial start. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Ken Rannick is recognized as a Board Certified (Senior Specialist) in Consumer Bankruptcy Law by the American Board of Certification. In addition, he is recognized and inducted as a “Superlawyer” by his fellow lawyers, which is awarded to less than 2% of all lawyers in his field.
We help good people through bad times.