There are many reasons that people feel the need to file for personal bankruptcy. Unexpected medical bills, job loss or the inability to find work that pays enough to meet rising living costs have landed many people in this situation.
Before filing, you should understand what a personal bankruptcy filing can and cannot do.
Personal bankruptcies do not cover all types of debt
While Chapter 7 and Chapter 13 bankruptcies can help with many debts, they won’t necessarily cover all of your debts. It depends on what your debts are for. Here are some things that it will not cover:
Outstanding child support payments
If you owe money for child support, the law obligates you to pay this. That’s because the child will likely rely on that money coming in (even though they won’t actually handle it themselves). If you fail to pay, the courts could create an order to take it from your wages or other sources, even if you file for bankruptcy.
Student loans
There is a vague chance a court would allow you to include student loans in your filing, but mostly, they’ll refuse. Some politicians have argued for more leniency, but the resistance has been too great for significant change to pass.
Outstanding taxes
Most kinds of tax still need to be paid, even by those who successfully file for bankruptcy. However, there are cases where a filing could rid you of some tax debt.
It’s not all bad news, though. If a bankruptcy filing removes (or, in the case of Chapter 13, rearranges) your other debt obligations, you should have more spare money to pay those debts you cannot discharge.
Learning more about your options is crucial if you have debt you cannot pay.
