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Warnings About Debts Before Bankruptcy

March 01, 2012 | Comments: 0 | Views: 179

While filing for bankruptcy is a valuable tool for alleviating debt burdens for some, not all debts can be easily managed in bankruptcy. Even some debts that do qualify still come with additional issues that should be considered by the debtor prior to filing. Before filing for bankruptcy it is important to know the dirty details behind certain debts.

General Debts

A general debt is one that is accumulated through regular lines of credit or lenders. Credit card debts, medical bills, car loans and mortgages are all considered to be general debts in bankruptcy. While these debts are different from each other in significant ways, it is safe to assume that all of these debts are easily managed in either Chapter 7 or Chapter 13. The only important aspect to note about general debts is how they will be treated in a particular case. Unsecured debts, such as credit cards and medical bills, are easily managed in either Chapter 7 or Chapter 13. However, secured debts like a mortgage or car loan are best handled through a Chapter 13 repayment plan. This prevents the risk of asset liquidation and ensures the debtor gets to keep the property while they continue to make payments. Another thing to remember is that accumulating debts over $500 within 90 days of filing may be viewed as suspicious and may not be eligible to be included in the case.

Tricky Loan Debts

With so many lenders offering payday loans and cash advance loans, many people are tempted into trying out their "fast cash" solution. The problem with these types of lenders is that they offer horrendous interest rates that can exceed 100% at times. Further, many of these lenders may require an asset to be put up as collateral or the borrower to provide postdated checks for the repayment. Both of these instances can greatly complicate the bankruptcy process. If any asset is secured to the loan as collateral the debtor may not be given much time to protect it from liquidation by the lender. Postdated checks for repayment means guaranteed repayment of the loan for the lender, but creates difficulty in bankruptcy requiring extra steps to halt these checks from being cashed.

Non Dischargeable Debts

Many people enter bankruptcy under false assumption that all debts are equally eligible for a debt discharge only to later find out their debt doesn't qualify. Certain debts are not eligible to be eliminated in bankruptcy, especially not through a Chapter 7 case. Student loan debts, certain back taxes and unpaid child support debts are the three main types of debts that are not eligible for bankruptcy protection. Income tax debts may be eligible for Chapter 13, but they must meet strict guidelines. Student loan debts have been accepted in some cases, but are only eligible to become part of a Chapter 13 case.

The Lee Law Firm aims to provide local residents with high quality legal representation at affordable rates. Their Dallas bankruptcy attorneys specialize in all aspects of Chapter 7 and Chapter 13 Bankruptcy. As bankruptcy lawyers in Dallas, the Lee Law Firm attorneys understand the pressures their clients face as the battle a financial hardship.

Source: EzineArticles
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