Filing for Bankruptcy – What Debts Are Erased?

You should know the answer to this question before you going for bankruptcy. The last thing you want to find out is bankruptcy on your credit history, a poor credit score and additional debts that you have not escaped yet. There are certain obligations that cannot be escaped even when you going for a bankruptcy.

Child maintenance, alimony and others such financial obligations are not affected by bankruptcy. This is because these obligations are not just your moral and ethical but also your legal responsibility as well. Hence, the law clearly states that you will have to repay these debts in a prompt manner.

Secondly, secured debts that are based on a particular asset or a particular piece of property will not be discharged. Simply put, your home mortgage loan will not be discharged until and unless you repay the debt in full. If you go in for bankruptcy, the assets will be sold off and the money shall be used to repay the debt.

At that point, the loan provider will have the right to claim the money obtained from the sale of the house property towards repayment of the home mortgage loan. This means that the total amount that is owed to the lender will have to be repaid in full. Do not expect to regain control of your home when you have a loan owed on it.

Once these loans have been settled, the remaining amount left after disposal of your assets shall be distributed to your unsecured lenders. It is this category of loan that is completely erased.

This is because unsecured loans, as the name suggests, is not based on any security or property. Hence, a default on your part will automatically rid the creditor of the right to recover the amount.

Of course, we are talking only about Chapter Seven bankruptcy here. Chapter Thirteen bankruptcy is nothing but a state sponsored debt management plan. The court will decide how you should repay a debt and to what extent you should repay. It may not be a hundred percent repayment but it certainly will be a high amount.

The means test introduced by the 2005 amendment has made it difficult to file for Chapter Seven bankruptcy again and again. It would not be incorrect to say that it has become virtually impossible for all practical purposes. If you do not qualify in the means tests, you won’t be permitted to file for chapter seven bankruptcy as well.

If you are over $10k in unsecured debt it would be financially prudent for you to consider a debt settlement. There are organizations that exist called “Free Debt Relief Networks” that are a great place to start in locating legitimate debt settlement companies in your region. They provide free debt help and know where to locate the top performing debt settlement firms. To get free debt help check out the link below:

Free Debt Help.