What Happens If I Declare Bankruptcy?
When you file for bankruptcy, you must surrender your assets. As a result:
- You will receive an automatic stay, which means that creditors can no longer pursue you for debt payments.
- When you discharge your debts, you no longer have to repay all or some of your financial obligations.
- You will be assigned a bankruptcy trustee to manage your assets and pay off your debts.
Depending on the type of debt you have, you may discharge most of your debts through the bankruptcy process.
Unsecured debts include credit card balances, personal loans, some student loans and medical bills. You can discharge these types of debts through bankruptcy.
You cannot discharge any type of loan that is secured with another asset. This is called collateral. In the case of a mortgage, the collateral is the home. If the homeowner defaults on the mortgage payment, the mortgage lender could repossess the house. The same is true for a car loan for a new vehicle purchase. These types of loans are not protected from bankruptcy.
Other Bankruptcy Exemptions
Bankruptcy proceedings won’t discharge you of responsibilities such as child support payments, spousal support payments, court-ordered fines, or restitution payments.