Though bankruptcy may give relief to debtors from the acts of creditors, eliminate some consumer debts or lead to the creation of a repayment plan for those debts that will have to be settled, eventually leading to a discharge, on occasion there are things bankruptcy cannot do.
When Creditors have claims against the debtor bankruptcy cannot protect them if not disclosed to the bankruptcy court when filing. Therefore, the debtor must be certain to put together a detailed disclosure of every single one of the creditors however time intensive this may be.
Chapter 7 cannot offer complete protection for debtors' assets, as it is a solution that causes the selling of assets to settle secured debts. Nonetheless, exceptions can be achieved with the assistance of the court and creditors. Chapter 7 is not able to totally safeguard the debtor out of creditors' claims. Even with discharge, objections might be filed within the court inside the deadline period by creditors or the trustee in the case if problems associated with disclosure or some kind of irregularity can be proven.
If a creditor has a lien on a property and wants to repossess the property because of a secured debt, bankruptcy cannot shield you from this. Foreclosures are halted by Chapter 13, but the debtor must put together a repayment plan that enables payments to be made for the existing mortgage and catch ups on payments that were not made previously. One of the stipulations is that the debtor will have to show regular income.
If you have a business that is barely getting by bankruptcy cannot provide a quick and easy fix. Based on the size of the business, small businesses being the exception, a chapter 11 path to bankruptcy may take up to 18 months to file and prepare a repayment plan. An attorney is highly recommended as well as other professionals could possibly be involved. Payments will likely need to be paid at intervals even when the plan is in the process of being filed.
Most of the time, certain classes of debt bankruptcy cannot reduce or eliminate. For instance, debts of a personal nature related to child support, spousal support or alimony are not addressed when discharge occurs resulting in the debtor's liability for the repayment of these types of debts. In addition, these payments must be part of a repayment plan under chapter 13, and this could result in the plan having to entail the longer period of five, instead of three years.
Various other debts, such as fines owed to municipal or government bodies, or fines of a criminal nature cannot be discharged. Nor can debts linked to harming or killing a person while intoxicated be discharged as a result of filing bankruptcy. Moreover, debts associated with fraud remain even after other debts are discharged.
Generally speaking, tax debts cannot be eliminated. When this has been done, it has been a complex, prolonged and expensive process normally related to old tax debts.
Under most circumstances student loans cannot be discharged from the Bankruptcy Code, although you are able to plead hardship. However, this is not necessarily granted as it is required that the debtor proves inability to pay now and in the future.
Debtors should take into considerations these potential limitations on debt reduction when filing with the bankruptcy court.