Tips About Non-Dischargeable Debts in Bankruptcy Filing

Posted on August 30, 2009 @ 11:40 am

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Of the many types of debts that a person can discharge with a bankruptcy filing, there are some forms of debt are often the most difficult to get completely discharged without some type of repayment plan. Whether it is a student loan, a personal loan, or a home equity loan, bankruptcy does not always clear the obligations of the debtor without undergoing some type of asset liquidation or repayment agreement. The bankruptcy courts have made this provision for several reasons and it is nearly impossible to change their minds.

Bankruptcy filing does not solve all of a debtor’s financial problems. Courts have deemed that debts which could be harmful or unproductive to the nature of society are non-dischargeable in a typical bankruptcy. The idea behind this is so that people cannot relinquish their obligations to pay child support, alimony, and other money that contributes to the good of society. This idea of non-dischargeable debts also spreads to student loans because of the amount of money granted by the government each year for college educations. Student loans are possibly the most difficult types of loans to get discharged through bankruptcy. Until recently, they were covered under the types of debt that were dischargeable under loan bankruptcy guidelines, but recent amendments to the code have changed this.

In terms of bankruptcy, business filings are often forced into a plan to repay the business’s creditors. The bankruptcy courts often see completely discharging the debts of a business as detrimental to society because of the ramifications involved. With a Chapter 7 bankruptcy, business assets are typically liquidated and the company shuts down. This results in a loss of jobs that help to pump money into the economy. This is why businesses are often forced into a Chapter 11 bankruptcy because their debts can be reorganized and the creditors can be paid in installments while the business continues to operate.

For people who have fallen behind on car payments or home mortgage payments, bankruptcy filing can grant a temporary protection from their creditors. Chapter 13 is designed in such a way that homeowners or consumers with other types of secured debts can retain their property even if they have fallen behind in the payments. The debtor makes arrangements with their court-appointed trustee to make payments along with extra money to help them catch up on missed payments with this type of bankruptcy. Mortgage companies are willing to work with debtors because they would rather afford them some leeway rather than go through the trouble of court proceedings involved with foreclosures.

Although it might be difficult, many people can still receive mortgage loans after going through a bankruptcy. Mortgage companies that do manual underwriting are more likely to grant a mortgage loan, but it will typically have a higher interest rate as well as strict repayment guidelines. If your bankruptcy was the result of a solitary life event, mortgage companies will also take that into consideration if your finances are in order other than that.

Bankruptcy can change a person’s life. While it offers temporary protection from the legal actions of creditors, the effects of a bankruptcy filing can haunt you for the rest of your life. One problem is that many debts that cause a person to get into financial trouble cannot be discharged. Financially, you are subject to years of higher interest rates and stricter payment schedules.

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