Debts and liabilities are the focus for an individual filing for bankruptcy. The whole purpose of bankruptcy filing is to discharge past debts and financial liabilities. Bankruptcy is not just for big corporations and is not a way to get free money. Personal bankruptcy provides a way for individuals and their families to get out from under crushing debt and give them a fresh start. Bankruptcy is often a necessary option when people are hit with sudden expenses they cannot cover, including after a natural disaster, loss of a job, or medical emergency.
Bankruptcy can put an immediate halt to harassing creditors and may also allow you to keep certain important assets. If you have any questions about filing for personal bankruptcy in Missouri, talk to your experienced bankruptcy attorney to understand your options and protect your family's future. Contact the Joshua Wilson Law Firm today at 816-331-9968.
Difference Between Debt and Liabilities in Bankruptcy
Debts and liabilities are often discussed together when talking about bankruptcy. Debt can be a type of financial liability but liability can also include other economic obligations.
Debt generally involves money borrowed as part of a loan. The terms of the loan generally require repayment of the debt through regular payments, subject to interest or penalties. Some of the most common forms of debt for individuals going through bankruptcy include:
- Credit card debt,
- Car loan,
- Student loans,
- Medical bills, and
- Home mortgage.
Other liabilities include payment obligations not related to goods and services or loans. Common liabilities for individuals going through bankruptcy include:
Dischargeable and Non-Dischargeable Debt in Bankruptcy
Not all debts are dischargeable after bankruptcy. Some debts are not dischargeable. Other debts may require special approval from the bankruptcy court to be discharged. Some debts that are not dischargeable or require special approval include:
- Child support,
- Post-separation support,
- Student loans,
- Debts for willful and malicious injuries to person or property,
- Debts to the government for fines and penalties,
- Debts for personal injury caused by DWI,
- Fraudulent debt, and
- Debts for certain condominium fees.
Secured Debt vs. Unsecured Debt
Another important term in bankruptcy involves secured and unsecured debt. Secured debt is usually tied to an asset as security or collateral. For example, a car loan may be secured by the vehicle itself. If the debt is not repaid, the vehicle may be repossessed. Alternatively, a loan may be secured by something the debtor already owns, such as a loan secured by a lien on the borrower's home.
When the borrower is delinquent or fails to make payments, the lender may seize, repossess, or foreclose on the property. If the secured property is not enough to cover the loan, the lender can still come after the borrower for the remainder of the debt, or deficiency balance.
Unsecured debt is generally not backed up by a specific asset. There is still an obligation to repay the debt but the lender does not have an automatic claim on a certain property, like the borrower's home or car. Instead, with unsecured debt, the lender may use a debt collector to come after the borrower for payment or file a court action to get a judgment to garnish wages or take money from a bank account.
In bankruptcy, certain lenders may have a priority claim on secured debt. However, the bankruptcy trustee will generally be able to seize all the debtor's assets and property, sell the assets and property, and distribute the proceeds to the creditors.
Continuing Obligations and Liabilities After Bankruptcy
Bankruptcy clears a lot of debt but an individual may still be liable for some non-dischargeable debt and continuing financial obligations. Any new loans, purchases, debts, or obligations entered after filing for bankruptcy may also not be discharged after bankruptcy is completed.
Leases and Contracts in Bankruptcy
Leases and contracts may be a financial liability for an individual filing for bankruptcy. A lease or contract may include:
- Rental agreement,
- Vehicle lease, or
- Business contract.
Generally, the bankruptcy trustee will have the option to assume the lease, if the lease may be of some value. However, most contracts and leases do not hold any continuing value and the trustee will reject the lease. The individual filing for bankruptcy may then be able to assume the lease, with notice to the trustee. Otherwise, the financial obligation will generally be discharged in bankruptcy. Talk to your Missouri bankruptcy lawyer about what debts and liabilities will be discharged in bankruptcy.
Missouri Bankruptcy Lawyer
Bankruptcy can erase most of your debts and liabilities. However, some debts cannot be discharged. It is important to understand how your debts and liabilities will be handled in a bankruptcy. Contact the Joshua Wilson Law Firm in Raymore today. Contact us online or by calling (816) 331-9968. We maintain a virtual capable law office to keep you safe and connected.