While some people consider bankruptcy a lifeline, it’s crucial to remember that this lifeline has limits. Bankruptcy can be a powerful tool for individuals and businesses overwhelmed by debt and financial obligations. Bankruptcy can offer a fresh start by providing a structured way to settle the financial obligations hindering their growth. However, bankruptcy is not a magic wand that erases all of your financial worries.
If considering bankruptcy, contact the Debt Doctors of Missouri to explore alternatives. Bankruptcy laws are complex, and an experienced professional is essential to understanding your options for building a brighter financial future.
Debts Not Typically Discharged in Bankruptcy
While bankruptcy can be a powerful remedy for serious debt issues, unfortunately, it doesn’t stop all creditors or eliminate all of your debt obligations.
Here are some limitations of bankruptcy:
- Tax Debts: Bankruptcy is particularly limited when it comes to tax debts and obligations. While Chapter 7 or 13 bankruptcy might extinguish older income tax debts, fresher tax obligations and a majority of tax debts will remain your obligation.
- Alimony and Child Support: Bankruptcy cannot negate your obligation to provide for your family. You’ll still owe the alimony and child support debts as if you never filed for bankruptcy, but under Chapter 13, you’ll have to repay the arrearage through the repayment plan.
- Student Loans: Most Americans grapple with the hard to shake debt that is student loans. There are rare cases hinging on demonstrating “undue hardship,” where these loans might be wiped away from bankruptcy, but achieving this is exceptionally challenging.
- DUI Debt: Drunk driving is seen as a serious issue and is barred from dismissal. These will only apply to those who were actually cited or convicted for drunk driving, but you will have to pay them whether you are filing for Chapter 7 or Chapter 13 bankruptcy.
Is Bankruptcy the Right Solution for You?
Those struggling with debt burdens can use bankruptcy to eliminate certain obligations and get a fresh start on their financial future. The most common types of bankruptcy filings, Chapter 7 and Chapter 13, offer different benefits and limitations. When considering which type of bankruptcy filing works best for you and your family, you need an experienced bankruptcy attorney.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is often referred to as "liquidation bankruptcy" and involves selling off some of your non-exempt assets to repay creditors.
- Discharge of Debt: After the sale of your non-exempt assets, the proceeds are distributed to your creditors. Once this is done, most of your remaining unsecured debts (such as credit card debt, medical bills, and personal loans) are discharged, meaning you are no longer legally obligated to repay them.
- Eligibility: To qualify for Chapter 7 bankruptcy, your income must be below a certain threshold. This is determined by a "means test" that compares your income to the median income in your state. If your income is too high, you may not be eligible for Chapter 7 and may need to consider Chapter 13 instead.
- Exemptions: State and federal laws allow you to keep certain assets, known as "exempt assets," even in a Chapter 7 bankruptcy. These exemptions vary by state and can include items like your primary residence, vehicle, and personal belongings up to a certain value.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a "reorganization" bankruptcy where you create a repayment plan to repay some or all of your debts over a three- to five-year period.
- Repayment Plan: You will work with a bankruptcy trustee to develop a repayment plan that outlines how much you will pay towards your debts each month. This plan is then submitted to the court for approval.
- Debt Repayment: Once the plan is approved, you will make your monthly payments to the trustee, who will then distribute the funds to your creditors.
- Discharge of Debt: Upon successful completion of your repayment plan, most of your remaining unsecured debts will be discharged. However, you may still be responsible for paying certain types of debt, such as secured debts (like mortgages and car loans) and priority debts (such as child support and alimony).
- Eligibility: Chapter 13 is often an option for individuals with regular income who want to keep their assets and repay their debts over time.
Feeling overwhelmed by debt can be incredibly stressful and impact every aspect of your life. Bankruptcy can offer a lifeline for many individuals and families struggling to keep their heads above water financially. However, it's crucial to understand that bankruptcy is not a one-size-fits-all solution and may not be the best option for everyone.
Your Path to Financial Recovery
Being overwhelmed by debt and left unable to meet your financial obligations may be some of the toughest points in your life. The constant stress of debt can be crushing, and while you may feel lost, don’t hesitate to reach out for help.
At Debt Doctors of Missouri, we are passionate about helping people achieve real financial healing with real solutions, legal rights, and renewed financial control of their future. Contact us today so we can get started on resolving your debt in the most strategic way possible. Our firm is here to help you focus on the present and take positive actions to create a better financial future for you and your loved ones.
