Resolving Debts in Bankruptcy
- Is it true I can cancel all debts by filing bankruptcy?
- Will bankruptcy stop a wage attachment?
- Will bankruptcy stop a foreclosure proceeding?
- Will bankruptcy stop an eviction, or unlawful detainer, action?
- Will bankruptcy stop a judgment?
- Will a bankruptcy remove a lien?
- If I am divorced, will bankruptcy eliminate my obligation to pay community debts?
- Is Alimony Dischargeable?
- Can I discharge student loans?
- If I am a co-signer for a debt, how does bankruptcy affect the obligation?
- What if I fail to list a creditor on the bankruptcy papers?
- How can I learn more about bankruptcy?
- What if my question isn't answered here?
Is it true I can cancel all debts by filing bankruptcy?
The underlying policy of bankruptcy law is that the honest debtor who is in debt beyond its ability to repay the debt should receive a fresh start through the discharge of debts.
However, some debts must still be paid. Generally speaking, the following debts will not be discharged: taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; nondischargeable debts from a prior bankruptcy; student loans; criminal fines and penalties and forfeitures. 11 U.S.C. sec. 523 describes exactly which debts can not be discharged.
Secured debts may be discharged. In most instances the creditor will take the necessary legal steps to recover the property unless you can reach an agreement for repaying the debt.
Will bankruptcy stop a wage attachment?
Yes.
Will bankruptcy stop a foreclosure proceeding?
Temporarily, yes. However, the lender is entitled to apply to the court for relief from the automatic stay to allow it to continue foreclosure proceedings. Usually, to keep a home that is in foreclosure, the debtor will have to make a deal with the lender.
Will bankruptcy stop an eviction, or unlawful detainer, action?
Sometimes it will, but it is usually not a good idea. The owner is entitled to possession of his property and at best the debtor will only gain a short delay. Filing a Chapter 7 solely to avoid an eviction might be considered an abuse of Chapter 7. If the Bankruptcy Court finds that this is true, then the court can immediately dismiss the bankruptcy and impose other legal and monetary sanctions on you.
Will bankruptcy stop a judgment?
Yes. Most civil judgments are stopped by bankruptcy.
Will a bankruptcy remove a lien?
Under some circumstances, once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens. The procedures are complex and require an attorney's assistance.
If I am divorced, will bankruptcy eliminate my obligation to pay community debts?
In general, you will be discharged from all dischargeable community debts. In some circumstances you may still be liable to your spouse if she or he pays the debt.
Is Alimony Dischargeable?
Alimony, maintenance and child support payments generally are not dischargeable. A few technical exceptions exist. In addition, 11 U.S.C. sec. 523(a)(15) provides that certain other divorce related obligations, such as payments to others, hold harmless provisions and property settlement obligations are not dischargeable if the debtor has the ability to pay them and the detriment to the spouse outweighs the benefit of the discharge to the debtor. In order to take advantage of section 523(a)(15) the spouse must obtain an order from the bankruptcy court declaring the debt non-dischargeable.
Can I discharge student loans?
Generally, student loans are not discharged in bankruptcy. 11 U.S.C. sec. 523(a)(8) does provide three possible exceptions to this general rule.
1. The student loan may be discharged if it is neither "insured or guaranteed by a governmental unit" nor "made under any program funded in whole or in part by a governmental unit or nonprofit institution."
2. The student loan may be discharged if it first became due more than 7 years (not including any period during which payment was not required) before the date the bankruptcy petition is filed.
3. The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."
Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. If a student loan falls into one of the three exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.
If I am a co-signer for a debt, how does bankruptcy affect the obligation?
If the debt is a dischargeable debt then you will not have to pay it. Your co-signer will become primarily responsible for the debt. If you file a chapter 13 petition, a special automatic stay provided by 11 U.S.C. sec. 1301 protects certain co-signers during the bankruptcy proceeding.
What if I fail to list a creditor on the bankruptcy papers?
If you intentionally omit a creditor from your schedules, you have committed perjury. However, sometimes a creditor is not known to exist at the time the schedules are filed. Generally, you may amend your schedules at any time during the bankruptcy proceeding to add an additional creditor.
If you accidentally omit a creditor, and the creditor does not otherwise learn about your bankruptcy proceeding in time to participate in the proceeding, the debt owed to that creditor might not be discharged.
How can I learn more about bankruptcy?
The Internet is a useful resource for learning about bankruptcy. The Bankruptcy Lawfinder includes links to a number of on-line bankruptcy law guides, including one at Cornell School of Law. In addition, most law libraries will have copies of "Norton on Bankruptcy," a comprehensive treatise on bankruptcy law and "Chapter 13 Bankruptcy" by Keith M. Lundin.
What if my question isn't answered here?
Send your question to Law Offices of Paul D. Post, PA using the Feedback page and we will try to help you. Make sure you state where you live. Please keep in mind that we can not provide legal advice over the Internet or answer questions about state law (other than in Kansas).
You may want to contact an attorney. Most bankruptcy attorneys do provide free initial consultations and can provide you with the guidance you need to decide whether to file a bankruptcy petition.