The bankruptcy process is meant to be a tool of assistance and can provide many benefits to those who qualify. One of the most notable aspects of bankruptcy is its ability to provide debt relief and protect certain assets from liquidation by creditors. While both of these aspects are great for those involved, they aren't the only things about the process worth noting. In order to get the most out of bankruptcy there are a few hidden aspects that everyone should know.
The Good
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Bankruptcy is riddled with potentially positive outcomes that are not well known or highly advertised. While most people know that bankruptcy can protect a home from foreclosure, most have no idea that filing for bankruptcy can help resolve second mortgages or home equity loans as well. The bankruptcy process can help reduce mortgage debts by converting a second mortgage or home equity loan into an unsecured debt, which can then be eliminated in bankruptcy. When this happens the debtor is left with the responsibility of repaying the original mortgage debt only. However, not everyone or every mortgage will qualify for this assistance, but it is something worth asking your bankruptcy attorney to review.
A portion of certain car loans can also be handled similarly. If a debtor is significantly "upside down" on a car note, meaning the car is worth far less than the amount owed on the loan, a portion of the debt may be written off. The 910 day rule states that a vehicle purchased more than 910 days before the bankruptcy filing day can have the amount equal to the difference between fair market value and loan amount converted into an unsecured debt. This allows for the debtor to make debt payments towards a fair market value loan rather than having to pay the original loan amount.
The Bad
Many people seek bankruptcy without reviewing some key rules about how the process works. First, the debtor is responsible for completing certain actions and complying with bankruptcy laws. This includes completing the bankruptcy petition accurately and filing it with the court. If a debtor attempts to conceal or withhold information about their debts or assets, their actions could be viewed as fraudulent and the case could be discharged by the court. The debtor is also required to pay the required court filing fees and complete a credit counseling course. Failure to complete either of these steps could also lead to case dismissal.
Many people who have had their case dismissed may be interested in re-filing their case with the court. There are strict rules about how often a person can file for bankruptcy. If a person's case was dismissed due to failure to complete the required steps, they must wait 180 days before re-filing their case. If the case was dismissed due to fraud, or suspicion of fraud, they may never be able to re-file their case. Anyone who has had debts previously discharged in bankruptcy court must also adhere to certain rules for re-filing their case. A debtor must wait 2 years to file for Chapter 13 after a previous Chapter 13 discharge; and wait 4 years after a previous Chapter 7,11 or 12 discharge. The waiting time is 6 years to file for Chapter 7 or 11 after a previous Chapter 13 or 12 discharge and 8 years after a previous Chapter 7 or 11 discharge.
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