How Debts Are Managed In Bankruptcy

If you are considering bankruptcy than you understand just how much of a debt debt can be. In fact, one of the largest perks behind the bankruptcy process is the immediate stop to credit collections, help with negotiating repayment and the final resolution of the debt liability. One thing many people do not consider is the journey their debt takes from before their filing to the end of their case.

Before Filing

This is perhaps the most crucial point of dealing with debts. When you are faced with the turning point of how to manage your debt liabilities in the mid of financial hardship, its choices can be overwhelming. While debt negotiation, settlement or consolidation are options for finding relief; the bankruptcy process is one that should be considered quickly if the nature of your debts are threatening. In other words, if you are at risk of losing assets, are digging deeper into credit debt to cover essential living expenses or do not expect your financial hardship to resolve within the coming months, you should consult with a bankruptcy attorney right away.

During Bankruptcy

If you do make the choice to file for bankruptcy, you can rest assured that time is no longer working against you. Once you file your petition, the court issues an automatic stay order. This order immediately halts all collection actions, including repossession, wage garnishment and even foreclosure. At this point your debts are not yet resolved, but you will not be experiencing the stressful nature that comes along with the threat of collections.

Once your automatic stay order has been issued, your creditors will receive notification of this order and your active bankruptcy case. At this point the court will begin formulating a plan to resolve your debts. Depending on which type of bankruptcy you file, your debts may be resolved through credit write-off or non-essential asset liquidation in a Chapter 7 filing. Otherwise, the court will develop a repayment plan for you to follow as part of a Chapter 13 case. As long as your case is active, the automatic stay order will protect you from creditors and require that they adhere to the plan determined by the court.

After A Discharge

Once your case is completed and you receive a debt discharge, the automatic stay order becomes permanent on those debit accounts. However, some debts will not be granted permanent protection against future liability. There are three reasons why a debt could still be collectible after a discharge. First, if the debt was not eligible for a discharge to begin with, as in the case of domestic support payments, some tax debts and student loan debts, then creditors will have the right to resume collection activity. If the debt was confirmed as part of an agreement between you and the lender to resume payment after the discharge, your credit will be able to hold you liable. Last, if a jointly held debt was discharged only for one member of the jointly responsible party, the other member could have been held fully liable for the amount owed on the debt.


Source by Richard Feinberg

Leave a Reply

Your email address will not be published. Required fields are marked *

Free Email Updates
Get the latest content first.
We respect your privacy.