Your Legal Rights at Work

Filing For Bankruptcy Doesn't Rid You Of All Debt

by Lewis Hamilton

If you are looking at filing for bankruptcy, it's important to look at the types of debt that you have before filing. Secured debt, back taxes, and back child support still must be paid back. This is a move that will have a big impact on your credit. If your debt is mainly secured debt, you'll still have to pay it back. Filing for bankruptcy is useful when you have an abundance of credit card debt that you can't pay back, or property that you can't afford to pay for any longer such as a car. 

Secured Debt Defined

A secured debt is one in which you owe money, and there is an item used as collateral that can be taken back by the lender if you don't pay the debt. In the case of a car or a home, if you don't pay your car payments or mortgage, the lender can take the car or home back from you in default. In the end, you will be able to write off the money you owe to lender in a bankruptcy, but you will no longer have the collateral property.

Debt That is Wiped Out with Bankruptcy

The debt you owe to credit cards and other unsecured sources can be wiped out in a bankruptcy. With no lien on your property, or no collateral to take back, unsecured debt is why bankruptcy filings occur in the first place. Once the bankruptcy is finished, you will no longer owe money for your unsecured debt.

Debt You Can't Discharge in a Bankruptcy

Back child support payments, alimony, most student loans and back income taxes all must be paid for, even after a bankruptcy. It is close to impossible to discharge any of this type of debt in a bankruptcy, unless you can prove immense hardship if you were to pay the money back. If you owe any fines for traffic violations, or criminal acts, you also can't wipe out these debts in a bankruptcy.

If you are being harassed by creditors and you have no way to pay back your debts, it's time to sit down with a bankruptcy attorney to discuss your situation. If you live in a home that you are trying to keep, you might consider filing a Chapter 13 bankruptcy. This type of bankruptcy can restructure your debt, allowing you to come up with a repayment plan to get your mortgage back up to date. For more information, contact Hoffman, Hamer & Associates, PLLC or a similar firm.