Bankruptcy may make it possible to:
- Eliminate the legal obligation to pay most or all of your unsecured debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start. Unsecured debt is debt that is not backed up by property (like a mortgage or a car loan).
- Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
- Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
- Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt. Once a bankruptcy is filed, an automatic stay is in place. This stay prevents creditors from taking any action to collect a debt, or taking control of your property. If a creditor deliberately violates this stay, you may request that the Court review the creditor's actions.
- Restore or prevent termination of utility service.
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
Bankruptcy can not:
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual.
In bankruptcy, it is usually not possible to:
- Eliminate certain rights of secured creditors. A secured creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
- Discharge types of debt singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, some student loans, court restitution orders, criminal fines, and some taxes.
- Protect co-signers on your debts in a chapter 7 case. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the co-signer may still have to repay all or part of the loan.
- Discharge debts that arise after bankruptcy has been filed.<br>
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