If you are struggling financially, a bankruptcy case can allow you to have a fresh start in life. Individuals who are considering bankruptcy for debt relief must first be familiar with the legal process involved. Getting preliminary bankruptcy information is crucial to make sure that you do not face legal issues when filing bankruptcy.
How can declaring bankruptcy help? When done right, a bankruptcy filing can allow you to pay back certain lenders, wipe out some or even most of your debts, and address your financial problems.
Bankruptcy Chapter 7 and 13
Keep in mind that there are different types of bankruptcy. The specific bankruptcy proceeding filed by an individual largely depends on the types of debt he or she has, and on his or her circumstances. As such, it helps to remember that no two bankruptcy cases are the same.
Filing for bankruptcy enables you to have some or even all of what you owe eventually forgiven. Individuals who file for bankruptcy often try to have certain types of debts wiped out or eliminated. The term for this is bankruptcy discharge. The court order for this often comes after having assets and personal property liquidated (Chapter 7) or after making payments under the approved debt-repayment plan (Chapter 13).
Bankruptcy Proceedings and Non-Priority Debts
A bankruptcy declaration is, oftentimes, the best option for an individual struggling with debt. To make things less complicated for you, seek legal help from an expert who can assist with paperwork and discuss with you the basics of the bankruptcy code.
One of the roles of a trustee in bankruptcy proceedings is to check if filers are making payments of priority debts to creditors. While you ideally pay all of what you owe from a creditor, the bankruptcy trustee will ensure that certain debts are ‘prioritized’. Under relevant bankruptcy law, these include child support or alimony, fines or penalties, and certain tax debt. In general, while you must also pay back unsecured debts, they are often classified as non-priority.
Declaring Bankruptcy and Discharged Debts
A successful bankruptcy petition will allow you to have certain types of debt forgiven. Medical debt, credit card debt, personal loan debt, and most unsecured debt will likely be forgiven after bankruptcy. While student loan debt is technically non-priority, discharging them through either filing Chapter 7 or 13 can be difficult. An individual who filed for bankruptcy must first establish what is called undue hardship.
Student Loan and Your Bankruptcy Case
Even with a bankruptcy filing, most individuals still need to pay off student loans. A competent bankruptcy lawyer, however, can help you explore all your options. Getting legal help from the right law firm can enable you to turn your student loan into a discharged debt.
Bankruptcy rules currently in place do not have a strict definition of undue hardship. Interpretation and determining of such often depend on the specific bankruptcy court. With the exact definition of undue hardship varying from court to court, most look into what is called the Brunner Test.
There is a higher chance that your student loan debts will be discharged if poverty, persistence, and good faith can be proven. This generally means that paying off your student loan will affect your ability to meet a minimal standard of living (seen through monthly income and living expenses) and that your situation will not improve financially throughout the debt repayment period. Furthermore, it must be shown that significant efforts to pay the loan were made, but factors such as low income made it difficult to do so.
When you bring your petition for bankruptcy to court, the totality of your circumstances will also be evaluated. Under pertinent bankruptcy laws, if undue hardship can be established, a bankrupt debtor may have student debts wiped out as well.
The Need for Legal Assistance
After evaluating your assets, circumstances, and goals, and once you have decided on the chapter for your declaration of bankruptcy, seek help from a trusted bankruptcy law firm.
For questions on how to file, the need for bankruptcy counseling, the means test, or the bankruptcy process in general, contact a local attorney knowledgeable on relevant state law. Call us at Farmer and Wright, PLLC at 270 387 1414 to consult with a reliable bankruptcy attorney.