I speak with individuals each day who are frustrated, anxious, and exhausted from dealing with debt problems. Many clients tell me how they are harassed by endless telephone calls from debt collectors, how they are threatened with lawsuits, and how creditors are calling their place of business. Creditors threaten to take property through foreclosure and repossession under secured liens. Unfortunately, there are very few ways to stop creditors from taking these actions short of paying the debt in full. The laws enacted to prevent creditor harassment (FDCPA) do not work as well as they should because obtaining justice through this process takes a long time and the process is difficult.
Bankruptcy is often a much quicker, easier, and less costly means of stopping creditor harassment. Once the bankruptcy case is filed, the automatic stay prevents creditors from taking any further action to collect a debt without court approval. The automatic stay remains in effect until the end of the bankruptcy case to protect the debtor while he or she is in bankruptcy. The bankruptcy discharge protects debtors once the bankruptcy case has been completed and closed.
What is a Bankruptcy Discharge?
The ultimate goal when filing bankruptcy is to receive a bankruptcy discharge. According to the United States Courts’ website, a bankruptcy discharge is:
“A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.”
Most, if not all, of your debts will be eligible for a discharge. Examples of debts that are non-dischargeable include most taxes, student loans, alimony, and child support. However, even though a few debts may not be eligible for a discharge, the fact that you can erase thousands of dollars in unsecured debt allows you to reorganize your finances into a more manageable plan. One of the benefits of the bankruptcy discharge is that it prevents creditors from taking “any form of collection action” against the debtor for a discharged debt. Your personal liability for a discharged debt is gone forever.
What Happens To Secured Debts In Bankruptcy?
You must include all of your debts in your bankruptcy filing; however, different types of debts will be treated differently within the bankruptcy case. For example, some unsecured debts receive higher priority over other unsecured debts. Examples of priority unsecured debts that are paid before general unsecured debts include most taxes, alimony, child support, and administrative fees. Another type of debt is what we refer to as secured debt.
A secured claim is a debt that is owed to a creditor who holds a lien on collateral to secure the debt. Your bankruptcy discharge releases your personal liability to repay the secured debt; however, the bankruptcy discharge does not void a valid lien such as a mortgage or car loan. A valid lien attached to a specific piece of property remains in effect after the bankruptcy case is closed. This allows the creditor to enforce the lien against the property to recover the secured debt even though the debtor is no longer personally liable to repay the secured debt or any remaining portion of the secured debt once the property has been liquidated.
There are provisions within the Bankruptcy Code to void certain secured liens thereby transforming those liens into unsecured debts eligible for discharge. To discuss your legal options with regard to secured debts and bankruptcy, contact my office for a free bankruptcy consultation.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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