The Effects of Bankruptcy

Experienced Whittier Bankruptcy Law Firm

Bankruptcy offers many benefits, but it does not eliminate all types of debt. Before you decide to file for bankruptcy, it is important to understand the risks and benefits involved. We recommend speaking with a bankruptcy attorney first.

At the Law Offices of Nicholas Gebelt, we take the time to explain bankruptcy and how it may affect you now and in the future. We believe in helping people make informed decisions about their futures.

How Bankruptcy Affects Certain Situations

Pending Lawsuits

During the automatic stay you receive in bankruptcy, lawsuits are temporarily stayed. However, if the underlying cause of action in the lawsuit can be characterized as falling within the ambit of one of the non-dischargeability categories found in the Bankruptcy Code, then the creditor may file a lawsuit in the bankruptcy court and ask the bankruptcy judge to adjudicate the matter. It is therefore very important to determine the nature of the debt as part of the planning process. We will do that for you.

Home and Car

You are often allowed to surrender collateral, such as your home or vehicle, and thus discharge that debt.

If you file Chapter 7, you may have to give up your car unless you reaffirm your agreement or loan, exempt the equity you have in the car and continue to make payments. If the collateral is your home, you do not have to reaffirm the debt, but if you want to keep the house you must be current, and remain so, on the payments and insurance.

Under Chapter 13, you may be able to keep your home if you are current on payments and insurance from the day you file on and can afford to keep making those post-petition payments. However, any mortgage arrearage must be paid in full with interest through the Chapter 13 plan. You may also be able to lien strip a second mortgage if the value of the home is less than your current balance on the first mortgage.

Student Loans

Student loans are usually not dischargeable under any bankruptcy chapter. However, we have helpful information about paying off your student loan.

Cosigners

If the person filing bankruptcy is a cosigner on a debt, he or she can surrender the interest or asset and their personal liability will be discharged. On the other hand, non-filing cosigners of debts that are discharged in bankruptcy may be held liable for the debts. In other words, nothing changes for that cosigner because they didn’t file bankruptcy.