If you’re thinking about filing for bankruptcy, then it would be wise to know what all it can and can’t do for you. Yes, it can keep most of the wolves off your doorstep. But it’s not a cure-all. Here are some of the key benefits and limitations to filing for bankruptcy.
What Bankruptcy Can Do
Stop your wages from being garnished – If a creditor sued you and won, the judge might have stipulated the repayment remedy to be having your wages garnished. However, if you file for bankruptcy, any future payments to them will be immediately stopped. The only time a bankruptcy may not be enough to stop your wages from being garnished is for certain past due debts such as child support.
Repel a home foreclosure – The rules will vary by state. But in most cases, the bankruptcy proceedings will exclude your home from taken.
Stop an eviction – You can’t be tossed out of a home or property if you file for bankruptcy before a local eviction judgment has been finalized.
Stop nearly any type of civil lawsuit in it’s tracks – Typically, when you’re involved in a lawsuit of any kind, there’s usually a money component that will come into play. However, if you file for bankruptcy before or during the proceedings, that could bring everything to a screeching halt as the other party regroups and reevaluates their strategy.
Halt repossession of your property – If you have vehicles that have past due payments, the creditor won’t be able to repossess them if you file for bankruptcy.
Get the IRS out of your pocket – The IRS is notoriously known to seize bank accounts and other property with little or no notice if they believe you owe for back taxes. Filing for bankruptcy will send them back to their cave.
What Bankruptcy Can’t Do
Get your cosigner off the hook – If someone cosigned on a loan to help you purchase a home, car, or something else, the creditor can still go after them to collect payment. You might be off the hook, but not them.
Cease any regulatory proceedings being conducted by the government – If you’re involved in an issue that a governmental body (FTC, Justice Department, EPA) is investigating, that will continue.
Stop criminal courts from prosecuting you – If only it was that easy. Unfortunately, bankruptcy won’t do you much good.
Erase back child support and alimony – Whatever plan was put in place for these payment will continue, unless you an alternative is proposed under a Chapter 13 bankruptcy plan.
In conclusion, bankruptcy is a viable solution if your debt is so large and overwhelming that you know it will take years to pay it down. It’s a serious undertaking and should never be seen as a way to get revenge or get out of situation you’re unhappy with.