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Four Debts You Cannot Eliminate When Filing for Bankruptcy

Many individuals considering bankruptcy are often under the assumption that virtually all their debts are included if they file for Chapter 7 bankruptcy (liquidation) or Chapter 13 bankruptcy (debt restructuring).

Unfortunately, this is not the case. There are some debts that cannot be eliminated even if you go the drastic route of filing bankruptcy. These include:
Student Loans

In most cases, student loans are not discharged when you file for bankruptcy. This, unfortunately, includes all types of student loans. Whether federal loans, private loans, or school loans, it’s not as easy to get rid of especially since these types of loans are exempted from bankruptcy law.

The only way around this is if you can somehow prove at the time you file for bankruptcy that you will never be able to acquire work due to disability and that it is impossible for you to pay off the loan. It is, however, very difficult to qualify for exception so most bankruptcy lawyers advise against following this course.

One option to decrease the burden of student loans is to apply for an Income-Based Repayment Plan or the Income-Contingent Repayment Plan under the College Cost Reduction and Access Act of 2007. Those who qualify for either plans still have to pay off their student loans but payments are reduced based on financial ability to pay. Loans can also be forgiven after 10 or 25 years of payments either based on one’s career choice or if under the Income-Contingent Repayment Plan, regardless of career choice.

The Public Service Loan Forgiveness Plan is another way to ease the burden of student loans. Under this plan, eligible candidates can apply for employment in government agencies or nonprofit agencies to pay off their loan. Those who can prove that their income is less than 150% of the federal poverty level will have $0 loan payments for as long as they remain within that income margin. However, 120 monthly payments is still required before the loan is forgiven. It is also worth noting that this plan only applies to federal direct student loans.

Child Support

Both child support and alimony are exempted from bankruptcy law. All dues payable for this purpose cannot be discharged even after filing bankruptcy.

Secured Debt

Secured debt is also exempt from bankruptcy. This applies to consumer debts like vehicles and other expensive items like jewelry. Once you file for bankruptcy, you either have to forfeit or pay off your remaining balance to your lender.

You can, however, surrender the item to the lender to wipe off your existing debt.

Divorce Legal Fees and Ex-Spouse Credit Card Debt

Any legal fees acquired during a divorce and any credit card debt under your name or your ex-spouse cannot be wiped out with bankruptcy. If you are the party who agreed to settle all legal fees and debts acquired during your marriage, you will still have to settle all debts even after filing for bankruptcy.

It is important to check if your type of debt can be discharged to avoid unnecessary filing of bankruptcy.

Robert Aronov Esq: Call 877-529-6699: Bankruptcy lawyer in Queens, NYC, Brooklyn, Long Island & Manhattan. Cheap & inexpensive chapter 7-11-13 in NY

Filing Bankruptcy: Part With Credit Card Debt

Buried in Credit Card Debt? What Are Your Options?
Credit card debt is one of the most common types of debt in the United States next to mortgage and student loan debts. As of September 2014, the average household credit card debt in the US (those with outstanding credit card debts) is about $15,607.

While these are large numbers, they are still manageable for those with stable employment but what happens if your credit card goes way beyond manageable numbers?
Many people have succumbed to bankruptcy because they owe more than they have or more than they earn in a year. This is why people are advised to use their credit cards responsibly. Unfortunately, this is easier said than done.

While no one wants to admit that they owe more than they can manage, if you have a large amount of credit card debt, there’s nothing else you can do but to look for ways to fix it before interest charges spiral out of control. If you have more credit card debt that you can manage it may be a good idea to speak to a local bankruptcy lawyer. Before that though, it may be a good idea to get acquainted with some of the legal options relating to debt & bankruptcy:

Chapter 7 Bankruptcy

If you only have credit card debt, one option is to declare Chapter 7 bankruptcy. If you declare chapter 7 bankruptcy, your assets will be liquidated to pay off your creditors with the exception of some exempt property.

It is worth noting, however, that chapter 7 only takes care of unsecured debt like credit card debts, utility bills, and medical bills. These debts will be discharged if you file chapter 7 bankruptcy.

If you have other types of debt like mortgage debts and car loans, chapter 7 might not be a suitable option for you because this type of bankruptcy does not discharge secured debt liens.

To be eligible for chapter 7 bankruptcy, you have to pass a means test to determine if your income is not enough to cover your debts.

Chapter 13 Bankruptcy

This is a suitable option for people with credit card debt and other types of debt. Chapter 13 does not involve liquidation of your assets, but rather a restructuring and consolidation of your current debt. Filing for Chapter 13 bankruptcy allows you to restructure your debt and come up with a payment plan and timeline that will allow you to settle all your debts within reasonable means.

However, to be eligible for chapter 13 bankruptcy, you need to pass certain parameters (more than $1,149,525 of secured debt and $383.175 of unsecured debt).

Debt Settlement Plans

Since bankruptcy can significantly ruin your credit score, it is not to be taken lightly. Before considering bankruptcy, you should try to work out a repayment plan with your creditor. If you have significant debt and working out a repayment plan on your own is not an option, you can look through other debt settlement options like signing up for a debt settlement plan with an accredited firm. The firm will help you negotiate with your creditors and will help you assess your monthly income and finances so you can come up with a feasible plan to pay off your debt every month.

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