Terms to Know When You Are Filing for Bankruptcy

26 March 2015
 Categories: Law, Blog


Debt is a harsh mistress, While you can buy houses, cars, and other goods that you could otherwise not afford by incurring debts, paying debts can put a real strain on your budget. In some cases, if you have enough debts, you might feel like you are a slave to your debts and never have enough money for your needs and wants. If you have reached a point where debts have a stranglehold on you, and it seems that you will not be able to survive from day to day, you should consider filing for bankruptcy. Before you file for bankruptcy, you should learn about key terms relating to bankruptcy proceedings. 

Debt that You Can't Escape from

While you can decrease or avoid payment on many different debts by filing for bankruptcy, there are some debts that you can't or might not want to escape from.

While you might like to remove all of your debts by filing for bankruptcy, there are certain debts that courts will not allow you to shirk. If you owe child support, alimony, or criminal retribution, you cannot stop payment. Instead, you will need to carry out these court-assigned debts. 

You might also want to reaffirm certain debts. For example, if you have mortgage on your home, you might want to continue paying for the debt so that you don't have to give up your home. You might also want to hold on to a car or any possessions that you have that help you to make a living. Instead of canceling these debts through bankruptcy, you might choose to reaffirm them. 

Trustees and Liquidation

While you are able to hold onto some of your property by means of exempting it from bankruptcy proceedings, any property that you don't maintain through reaffirmation or exemption will be sold off to cover your debts. The court will typically appoint a trustee to oversee the sale of property and to decide how to pay off creditors with the money raised through liquidation. This trustee serves both to keep creditors at bay and to make sure that debtors sell their property for a fair value and give the money raised through these sales to the creditors. 

Bankruptcy can damage your credit for several years, so you don't want to go into a bankruptcy on a whim. Instead, you should reserve bankruptcy for when their really is no other choice, and you need to make a clean start for yourself and/or your family. For more information, contact Donald T Tesch, PS.