What Bankruptcy Can and Can’t Do

What Bankruptcy Can Do

Filing bankruptcy can:

  • Stop all further collection activity – creditors can no longer call or write, any pending lawsuits and/or wage garnishments are stopped.
  • Stop foreclosure proceedings.
  • Prevent repossession of a car or other property, and in some cases, force a creditor to return property even after it has been repossessed
  • Restore or prevent termination of utility service.
  • Eliminate the legal obligation to pay debts such as credit cards, medical bills, personal loans, etc.

What Bankruptcy Cannot Do

Bankruptcy cannot cure every financial problem. It is not usually possible to:

  •  Discharge certain debts – such as State or Federal income taxes, student loans, alimony and/or child support. (Although certain tax debt may be dischargeable).
  • Discharge debts that arise after the filling of the case.
  • Eliminate certain rights of “secured” creditors. A “secured” creditor has a lien on property as collateral for a debt, the most common examples of which are a home mortgage or car loan. Although bankruptcy may discharge the underlying debt to a “secured” creditor, it does not usually eliminate the lien on the property. Generally, you can retain the collateral only if you continue to pay the debt.
  • Protect co-signers on any of your debts.