Many debtors may have debt that has fallen into default; meaning some time ago they stopped making payments on it or it was related to secured debt such as car repossession . While bankruptcy may eliminate qualifying debt it may help to review your financial situation in more detail before deciding to file. One issue that could affect your decision to file includes statute of limitations on outstanding debt.
Everyone’s financial situation varies. Maybe you are considering bankruptcy after losing your home to foreclosure . This could be an issue if you are liable for any remaining balance on the property such as a deficiency balance outstanding on the loan after the sale. Some may consider bankruptcy if they had their vehicle repossessed. When the bank is able to resell the vehicle for the remaining balance then the bank wouldn’t look to pursue you (the previous owner). But, if the vehicle sold for less than the balance owed then bankruptcy could be assessed.
Credit card debt is often the most questioned debt when it comes to statute of limitations. These limitations are related to time limits creditors have to pursue debtors for outstanding amounts owed. The limitations vary depending on the state you reside. It may be as little as 3 years or up to 15 years. The limitation begins from the last day you made a payment on the account. Making a payment could restart the limitation period all over again. The obligation to pay the debt is likely moral when the limitation runs out and creditors can no longer purse collection attempts.
If the defaulted debt has been passed on to a collection agency and they decide to file a lawsuit, this may be grounds for you to seek bankruptcy protection if you are unable to pay the debt. Review your situation with a qualified bankruptcy attorney to learn if filing is an option.
Reference: http://www.bankrate.com/finance/debt/bankruptcy-erase-defaulted-debt