Are Outstanding Debts Exempt From Bankruptcy
February 8, 2008 – 11:48 pmDespite the fact that you are declaring bankruptcy, you may be surprised to find out that certain debts are exempt from this process. What this means is that no matter what the outcome of a bankruptcy hearing, you will still have to service or pay these debts regardless. This article will give you some common examples of debts that are exempt and advise how you should proceed if you are contemplating bankruptcy.
Many people are concerned about maintenance payments and child support. For anyone that has a court order requiring them to pay these amounts then bankruptcy will not exempt you from paying any outstanding money. Thus any debts that have been accrued in supporting these awards are not covered should you file for bankruptcy. All of the law chapters are included in this, including the personal chapter 7 and chapter 13. A lot of people think that filing for bankruptcy will absolve them (or at least protect them) from this debt. However the laws mean that they will have to find this money in full.
Another instance of a debt exempt from bankruptcy is IRS liens. If you have been subject to a tax audit that has led to you having to pay more taxes, then the IRS may put a lien on your home or take a portion of your wages. Unfortunately this can often be a substantial amount of money that you will have to owe the government and no bankruptcy law can protect you from it.
As we are talking about the government, it shouldn’t be forgotten that any form of government loan is seen as exempt from bankruptcy. This applies to government student loans too, that are a very common and useful way of financing education costs.
And the last important debt that is exempt from bankruptcy is any court orders that are handed down to you to pay a sum of money to a creditor before the bankruptcy process was ever instigated.
This is why you should get informed about the limitations of the bankruptcy laws and your obligations should you proceed. It is incumbent on you to understand what debts the courts can help you with and those that they can’t help you with. After all, there is a certain embarrassment about filing for bankruptcy, that includes losing your credit rating - you don’t want to have all the debt too.
So it is vitally important that you get a good audit of your personal finances before you think about bankruptcy. You have to calculate your monthly income and work out all the outgoings and long standing debt. Simply put, if any of your monthly outgoings or long term debt are any of the types mentioned above then you should reflect on filing for bankruptcy.
Additionally, you should find out if there are any outstanding judgments awarded by courts against you. You will be aware of this (even if you have chosen to forget it) as the law requires you to be notified if any litigation process is begun against you. To clarify, you can’t be protected by the bankruptcy law against these types of debts.
Tags: Bankruptcy
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