With a number of financial challenges, and unexpected twists and turns, bankruptcy has become something more and more Miami residents are considering. Those who dream of a “clean slate” will often look to Chapter 7 bankruptcy because it erases many types of debts, but it is important to realize that it won’t always mean those who file will wind up debt free.
In one recent case an actor filed who filed for Chapter 7 bankruptcy when he was in debt for close to a half million dollars. While his debt was reduced by just over $57k, the other $450k of debts remains. This is because the majority of this debt comes from back taxes the actor owes, and tax debt cannot be discharged through bankruptcy.
State and federal taxes are just one example of debts that cannot be obliterated by filing Chapter 7 bankruptcy, student loans are also exempt from being erased. That doesn’t mean people shouldn’t talk to a bankruptcy lawyer about the options for gaining control of their financial situation if they have tax debt or student loans. It just means they need to develop a strategy for handling the other debts, so that by the time their bankruptcy is discharged they truly do have that “clean slate” they are looking for.
Debt counseling and learning money management is an important part of the bankruptcy process. Even though Chapter 7 bankruptcy can mean getting rid of a lot of debt, it is important to take care of debts that don’t qualify, and mange future bills in order to retain future financial stability.
Source: Examiner, “Gary Busey comes out of bankruptcy still in massive debt,” Charlotte Raynor, Dec. 2, 2012