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How Does Bankruptcy Eliminate My Debts?

When people have more debts than they have income, turning to bankruptcy as a way out of debt is a good choice. But the way bankruptcy works is confusing, so it is important to understand the process before you begin the work needed to get a case filed. It is also important to know that bankruptcy is not a free pass, where you get to keep things without making payments. Difficult decisions on what to keep and what to give back will have to be made throughout your case, but once those decisions are made you can rest easy knowing a large chunk of your debt load is eliminated.

The way bankruptcy eliminates your debts is as follows:

• The ultimate goal of filing bankruptcy is to obtain an order of discharge. The discharge is the legal entry into your case that means your debts are no longer due. A discharged debt cannot be collected on, and you are no longer obligated to pay the lender for the loan.
• All of the debt you have is listed in your case when it is filed, this means at the outset all of your debts are eligible for discharge. But, along the way you will want to decide what pieces of property to hang on to, and for the ones you pick you will still have to make payments. The most common pieces of property that people keep when they file bankruptcy are their home and car.
• When you decide to remain in your house and to keep driving your car, you will have to keep up with the payments for these things or the lender will take action to recover their property. This recovery can be done outside of the bankruptcy court, once the lender gets the automatic stay lifted, by way of a foreclosure or a repossession action. If the debt was not reaffirmed, this is the only remedy the lender has because a discharged debt is no longer considered due. But, if you reaffirmed the debt, the lender can also seek a money judgment against you for a defaulted debt.

The benefit to discharging some debts, such as credit cards or medical bills, while opting to reaffirm others is that the payments you once made on discharged debts no longer have to be made. This means you now have more money to pay for necessities, like your home and car. Let us help you figure out your financial needs, and then file a case for you that will help you meet those needs.

For more information about how to manage debt and how bankruptcy can help eliminate overwhelming debt so you can focus on what matters, contact us at We will help by coming up with solutions that work for you.

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