Jeffrey M. Rosenblum, P.C.
A Fresh Start

Long Island Bankruptcy Law Blog

7 types of debt that last after bankruptcy

Bankruptcy can absolutely help you get rid of debt. Chapter 7 eliminates what you owe after assets are liquidated and as much debt as possible is paid back. For instance, you may owe $50,000 and have $10,000 in nonexempt assets. The other $40,000 is forgiven.

That said, it is important to remember that bankruptcy does not address all types of debt. Some can remain even after a successful bankruptcy filing. Below are seven examples:

  1. Debt that got overlooked and was never listed during the bankruptcy.
  2. Private and public student loans. In very rare cases are student loans discharged, but most are not.
  3. Debts from a lawsuit after you caused an injury or a death -- in a drunk driving accident, for example.
  4. Back taxes, like income taxes, that are still outstanding. The government offers its own payment plans, so bankruptcy does not apply.
  5. Other debts that you owe to the government, such as fines owed after a criminal case.
  6. Any money you owe due to a court order after a family law case. For instance, if you were ordered to pay $1,000 per month in child support, that obligation remains after bankruptcy.
  7. Any other amounts that you owe for legal penalties, no matter how minor. For example, perhaps you have two outstanding speeding tickets or a parking ticket.

Why is Chapter 13 called a wage earner's plan?

You may have heard Chapter 13 bankruptcy referred to by its nickname: the wage earner's plan. If you ever wondered why it got this nickname, it actually tells you quite a bit about how the process works.

The general idea is that only someone with an income can use Chapter 13 bankruptcy. Older guidelines said the person needed to get a consistent wage. In modern usage, a traditional "wage" is not always required; for instance, self-employed workers who do not get paid by the hour or receive bi-weekly paychecks can also use it.

Do bankruptcy filing fees have you reconsidering this option?

Wanting to become financially aware may hit you for any number of reasons. In particular, you may already have found yourself facing considerable financial difficulties and now want to get back on track. You may try to budget, account for every penny spent and make sure that you do not put money toward frivolous or unnecessary expenses.

Of course, even with putting your best efforts forward, you may not have the ability to fully address your outstanding debts or even put a major dent in your owed balances. You may be considering the idea of filing for bankruptcy, but with your new-found financial consciousness, you may wonder whether you should or even can put the necessary funds forward to start the process.

Can you eliminate student loans with bankruptcy?

You took out $100,000 in student loans. At the time, you were a teenager just trying to decide on a career path. You figured you would land a high-paying job with your college degree and then you could easily pay the loans back.

It did not pan out. Your degree isn't as useful in the real world as you thought it would be, and your job doesn't pay you enough to make ends meet, let alone pay back the student loans. You're thinking about declaring bankruptcy. Can your student loans be part of it?

Many stressful bankruptcy perceptions are false

Bankruptcy can be stressful. Some experts even claim that the mental and emotional stress can be worse for those going through the process than the financial strain that they face.

Unfortunately, part of the reason for this is that people have some perceptions about bankruptcy that cause stress, but that are also false. In short, they're creating a lot of this stress for themselves, when it could be easily avoided. Financial therapists often try to counter some of these misconceptions.

Not paying taxes could turn Chapter 13 into Chapter 7

You filed for Chapter 13 bankruptcy because you're still earning money, working as an independent contractor, and so you wanted to pay off your debt over three to five years instead of liquidating your assets. You like the idea of keeping what you own.

However, you neglected to put money aside to pay the IRS when income taxes come around again. Since you're a contract worker, it's never taken out of your paychecks.

Breaking down bankruptcy -- what you need to know

If you are one of the many New York residents struggling financially, you have likely started looking into all of the debt relief options available to you. Some may not seem very realistic, and others may seem too good to be true -- which means they probably are. At the end of the day, there is no quick fix or magic pill that is going to make everything better. Time, taking the right steps and hard work are the only things that can correct your situation.

Wondering how much time? Wondering what the right steps are? The truth is, it is different for everyone. For some, bankruptcy may be the best option, but there are different types of bankruptcy out there that work in different ways and run on their own particular timelines.

How often do you pay with Chapter 13?

You opt to file for Chapter 13 bankruptcy. With your income, you know you can pay the debt off. You don't want to lose any of your assets. You just need more time to pay.

You don't have to worry about paying everyone back; as long as you make the lump-sum payments, they'll get passed out for you. All of your debt is consolidated into a single plan. What you're wondering is just how often you'll have to send in those payments, which are then distributed to your creditors.

How Chapter 13 may help you keep the house

You're behind on your mortgage payments and you're facing foreclosure. You also have a lot of other debt from credit cards, personal loans and some medical bills.

You have started considering bankruptcy, but you do not like how Chapter 7 bankruptcy forces you to liquidate your assets. You want to hold onto as much as possible, and you especially want to keep your house.

The strange negative stigma in bankruptcy cases

Unfortunately, despite the fact that it is simply a legal financial option, bankruptcy often carries a negative cultural stigma. This is a curious development, as bankruptcy does not hurt the peers of a person filing in any sense, but the stigma remains.

Researchers have found that this sigma is often completely unnecessary and provides yet another unneeded burden for someone who is already going through one of the toughest financial times of his or her life. There is no social benefit and, often, no financial benefit.