When life’s unexpected financial hurdles get in the way, bankruptcy can offer a way to start over without the burden of crushing debt. Going bankrupt isn’t a cure-all, however. While it can help many people get back on their feet financially, as our New York bankruptcy lawyer explains, it isn’t the best option for everyone and doesn’t simply erase all debt.
Which Debts Won’t Be Discharged in a New York Bankruptcy?
At the end of a Chapter 7 bankruptcy, most of your outstanding financial obligations are forgiven. Some common types of debts are non-dischargeable and remain attached to you even after bankruptcy, however. In New York, you normally can’t discharge these kinds of debts when declaring bankruptcy:
- Alimony (spousal support)
- Back taxes that are less than three years old or any outstanding debts subject to a tax lien
- Child support mandated by a judge during a divorce
- Co-signed loans (the other signing party may still be required to pay the remainder, even if you are let off the hook for the costs)
- Criminal fines and court-ordered restitution
- Damages you owe someone else from a personal injury lawsuit such as a car crash or premises liability issue
- Student loans (although there are exceptions if you can prove paying the loan back would cause an undue hardship)
- Traffic tickets
The specifics of which debts can and can’t be discharged may vary depending on your situation. For instance, there are certain cases when an attorney can help you argue that higher education loans should be forgiven.
Of course, any debts you fail to properly disclose in the bankruptcy paperwork also won’t be removed. That’s one crucial reason why you need a bankruptcy attorney’s help, no matter your financial circumstances. It can, unfortunately, end up costing you significantly more to try to handle bankruptcy on your own than to consult a legal professional.
What Else Do I Need to Know About Debts When Filing for Bankruptcy?
Additional pitfalls may interfere with your financial recovery that an experienced lawyer can help you avoid throughout the complex New York bankruptcy process. For instance, some debts that normally could be wiped away may become nondischargeable if you make a common mistake. Purchases made with credit for luxury services or goods over specific dollar amounts won’t be discharged and can make the process take longer as your recent transactions are scrutinized.
Understanding exactly how your situation will change based on whether you end up filing for Chapter 13 or Chapter 7 bankruptcy is crucial to moving towards financial stability. That’s where an attorney becomes an invaluable resource, especially if there are concerns about keeping specific assets after bankruptcy. When filing for Chapter 7, there are cases where you can keep crucial assets like your house, vehicle or tools for your business instead of seeing everything sold off to pay your creditors.
Of course, depending on the outcome of the means test that must be taken when first filing for bankruptcy, you may not have all your major debts discharged at all. Instead, the overall amount may be reduced significantly into a manageable size you can feasibly pay off over the course of several years. That’s another important reason why you should consult an experienced bankruptcy attorney as soon as you think you may need to utilize bankruptcy.
By discussing your situation with an attorney, you can find out if bankruptcy is the right choice or if you should be considering other options. If you do need to file for bankruptcy, your lawyer can walk you through the procedure from beginning to end to prevent extremely costly problems. Experienced legal counsel can assist you from the initial filing through the means test, court-mandated financial classes, and finally rebuilding your credit when all is said and done.