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Many people choose to file bankruptcy when they want to start over by wiping their financial slates clean. Some Florida residents have chosen bankruptcy as a way to stop foreclosure, reduce their monthly payments or just remove their debt altogether. But are there limits to just what bankruptcy can and cannot do to erase debt? The answer is yes.

In bankruptcy cases, both Chapter 13 and Chapter 7 can stop a foreclosure and grant the homeowner a reprieve. Of course, with Chapter 13, however, the filer must keep current with all payments and catch up on late payments to keep the lender from being able to foreclose. With Chapter 7, however, the lender could still foreclose if the court lifts the automatic stay or upon the discharge of the bankruptcy.

Some debts can be hard or even impossible to discharge with bankruptcy. While Chapter 13 restructures payment plans and forgives some debt, Chapter 7 usually wipes away the debt. In Chapter 13, the filer tries to keep his or her property by making smaller payments and making up back payments. In Chapter 7, the filer may choose to give up some property. Nevertheless, there are some debts that cannot be erased no matter what chapter of the Bankruptcy Code is used.

Tax debt, for example, cannot usually be wiped away with bankruptcy. Federal tax debt is not typically something that a person can get discharged in bankruptcy. However, the law tends to be a bit more lenient on personal income taxes. Currently, student loans are also almost impossible to erase with bankruptcy. There has, however, been some progress made in this in the last few years, bringing more options to the table than before.

Alimony and child support payments are also non-dischargeable in Bankruptcy Court. For those who are thinking of filing bankruptcy in Florida, a knowledgeable bankruptcy lawyer can help explain the different types of debt, such as foreclosure relief and credit card obligations, that can be sought under bankruptcy. The lawyer can provide ongoing advice and assistance, focused on achieving lasting and comprehensive financial relief.

Source: thestreet.com, “The Limits of Bankruptcy: Debts That Filing Will and Won’t Erase“, Mark Henricks, March 15, 2017