Filing a bankruptcy is the usual answer of Utahns to discharge a debt. If granted by the court, the debtor is no longer legally liable to repay certain financial obligations and can stop creditor calls in Ogden, Provo, Salt Lake City, and other areas in the Beehive State.
While this is a good news to most struggling debtors, a bankruptcy isn’t a silver bullet that can solve all problems. It doesn’t guarantee your freedom to pay back all of your debts, nor protects you from repaying financial obligations in the future.
Not All Debts Are Dischargeable
Some debts can be discharged, but others can’t be. Generally, debts that arose before filing for Chapter 7 bankruptcy can be discharged. In return, you would have to liquidate some of your assets to cover such debts partially or completely. This way, the majority, if not all, of your unsecured debts would be erased.
On the other hand, priority unsecured debts are not covered by the bankruptcy. This means you still have to pay your taxes, any government-related debt, and domestic support obligations, such as child support and alimony.
You’re Liable for New Debts You Incur
While bankruptcy can pretty much bulldoze your mountain of debt, legal professional Godfreylawyers.com explains that its protection ends after the filing. If you acquire new financial obligations after the filing, even if the case is still pending, you would be legally obligated to pay them.
A Fraud Can Turn Things Around
Under certain circumstances, a dischargeable debt can become non-dischargeable. If your creditor can prove there was fraud in the way you incurred your debt, the court may render them non-dischargeable, thus allowing collection actions to continue.
A bankruptcy is a beneficial solution when used for the right reasons. Although this legal process can effectively wipe out most of your debts, only you can free yourself from your vicious debt cycle.