When people go through a financial crisis, sometimes bankruptcy is the best or Only solution.
For example, when someone insurmountable debts, often due to one-time events such as divorce, catastrophic illness, or business failure, bankruptcy may be the best way to overcome debt that person has no way of ever paying back.
The term "bankruptcy", most people intend to file under Chapter 7 of the bankruptcy code. This is known as straight bankruptcy, in which debts can be discharged (rid of).
Some types of debt can not be discharged in Chapter 7 so easily, however.
Take note of these eight exceptions before deciding to file Chapter 7 bankruptcy:
most arrears Taxes and customs
This generally includes taxes, social security taxes and penalties you owe, or the unpaid withholding tax for your employees.
Although most tax arrears can not be discharged in bankruptcy, you may be able to have taxes discharged if they are for a return because there are 3 or more years and you meet certain other qualifications.
If you need the significant back taxes that you can not pay within a reasonable time, you may want to ask a tax advisor or other professional about an offer of compromise or OIC or other alternatives.
child support and alimony
These payments are specifically not dischargeable under Chapter 7 bankruptcy.
student loans
you can not get rid of student loan debt through bankruptcy -. at least not right after you graduate or stop going to school
If you ready cause undue hardship to the opinion of the court, however, you may be able to having unloaded.
you usually need to show that you can not afford to pay student loans, now or for a significant portion of the repayment period of the loan, and you made a good faith effort to repay loans.
court under which you are filing may use other tests and criteria.
Home mortgage and other ownership privileges
If you have a lien on the property, such as a mortgage, you can not have the mortgage discharged in bankruptcy.
State laws vary, but you can usually keep your home in bankruptcy if you continue to make the payments and if you do not have greater equity in the house that you are allowed to keep by the law of the state.
debts of fraud, embezzlement, theft, or "voluntary and reckless acts"
This includes debts for death or injury due to driving under the influence alcohol or other substances.
your car loan if you want to keep your car
If you pay your car, the loan is secured by your car. When you bankruptcy under the new bankruptcy rules, you can "reaffirm" your car loan.
the good news is that if you agree with your creditor car loan to repay all or part of your loan the creditor will not take your car.
of course, you need to make payments according to the car loan reaffirmed.
debt that is not yours
Make sure the debt is really in your name before filing bankruptcy to get rid of him. Strange but true - people went bankrupt, only to find debt actually belonged to a former spouse or another person
New credit card debt
do not go on one last fired. before filing for bankruptcy. The courts frown recent accusations made just before a person files for bankruptcy.
Did not the courts deny a Chapter 7 bankruptcy?
Sometimes. Most individual debtors receive a discharge under Chapter 7.
However, if the courts find that a hidden individual money or other assets, fraudulently transferred assets that should have been used to pay debts, or otherwise violates the law, the whole of the bankruptcy case may be denied.
Have you ever been surprised to learn that a friend or acquaintance has declared bankruptcy in the past?
photo credit: Franco Folini via photopin cc
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