Bankruptcy has the ability to wipe out debt, but you’ll need to understand which debts qualify to be eliminated if you decide to file. You need to learn about the process and depending on your situation, what it will and will not do for you. This includes reviewing your debt situation, getting an idea of what problems the process will remedy and which debts may not qualify for discharge.
Bankruptcy deals contain two main types of debt including unsecured and secured. Most types of debt considered unsecured qualify for discharge. Secured debts, on the other hand, may not qualify for elimination but the filing process may help you learn other options to maintain this type of debt. To understand if bankruptcy is even an option, you’ll need to know the difference between each type.
Bankruptcy provides relief from overwhelming debt, but based on your situation you’ll need to review which problems the filing can be a solution for. Common issues a filing may remedy include wage garnishment , credit card debt , medical bills and pending lawsuits. Chapter 13 bankruptcy may help get you caught up on payments related to your vehicle or mortgage. The process is something to consider if you are facing repossession , foreclosure or a utility disconnection.
While bankruptcy is a powerful financial tool that can help you gain financial control, there are debts the process will not discharge. Debts such as back child or spousal support, student loans (on rare occasions) and certain forms of back taxes may not be eligible for elimination.