Bankruptcy can help improve finances in a variety of ways, but while it is a powerful tool debtors can utilize, bankruptcy does have limitations on what debt can be discharged or eliminated. It’s important to review your options in bankruptcy including what debt can be wiped out and what is left at the end of the filing. Certain debt such as back child support and certain tax debt may not be eligible for discharge under Chapter 7, but you could obtain payment arrangements in Chapter 13 that could help you pay off your debt in a reasonable time period.
Bankruptcy can help you eliminate unsecured debt such as credit cards and medical debt . Chapter 7 bankruptcy has the ability to discharge eligible debt as long as the debtor meets qualifications. Chapter 13 bankruptcy is a repayment plan that may allow for certain debt to be discharged when payments have been fulfilled. Chapter 13 can help reduce payments on certain debt, stop foreclosure and help you keep nonexempt property. The filing process can also stop creditor harassment and in many cases, repossession of secured property such as a house or vehicle. Also, a bankruptcy may be able to eliminate certain liens depending on your situation.
While bankruptcy can help in different ways, there are certain situations in which it may not help you. Bankruptcy doesn’t eliminate child or spousal support obligations. The filing process doesn’t eliminate student loans unless you can prove a hardship in repaying. Certain tax debt is non-dischargeable but it’s possible to have older tax debt qualify. Fines and penalties such as criminal restitution or unpaid traffic tickets may not qualify for discharge.