Bankruptcy Sometimes Does Not Eliminate All Debts Says Iowa Bankruptcy Lawyer
PUBLISHED BY: LFN Primary
Des Moines, IA (Law Firm Newswire) November 29, 2011 – Many think bankruptcy clears up all of their debts. This is not always the case.
“There are a lot of myths floating around about filing bankruptcy and what happens when you are done with the process,” stated Kevin Ahrenholz, an Iowa bankruptcy lawyer. “For instance, many people figure that once they declare bankruptcy, all of their debts are wiped out. This is not always true.”
The public needs to be aware that unsecured debts (non-exempt) may be completely wiped out on discharge of a bankruptcy proceeding. Secured debts are wiped out, but the process is different. “If there is a lien or liens on any of your secured debt, they are not erased. That means the lender may seize that asset from you to pay off your debt,” explained Ahrenholz.
There are also a variety of debts that are exempt from a bankruptcy discharge as outlined by federal and state statutes. In other words, there are debts that an individual is obligated to pay, no matter what. Those debts include alimony, child support, student loans, any court order against a filer and any debts that the court feels are fraudulent. “Another way to look at this is that if you can’t get rid of debts by legal means, then it’s a safe bet they are exempt from a bankruptcy discharge,” Ahrenholz added.
Stuck between a rock and a hard place with no money to pay non-discharged debts? “You have two options open if you find yourself in that kind of a situation,” said Ahrenholz. “The first is to do nothing and in some instances, the statue of limitations expires. The second is appeal to the court on the basis of undue hardship. If that can be proven, the court may forgive the debts. This does not happen that often, though.”
Many people are not aware that private and federal student loans cannot be discharged in a bankruptcy proceeding. The private loans have a statute of limitations based on federal laws, but federal loans have no such statute. However, if a plea of undue hardship is proven, the courts may either forgive the loans or postpone payments (for temporary hardship cases).
“Other debts that must be paid back are local, state and federal taxes,” explained Ahrenholz. “Proving undue hardship here is virtually impossible, and actually is impossible if the IRS slapped a wage garnishment or lien on your bank account. If that is the case, your debt may not be discharged.”
For those that are paying alimony and child support, it is best to discuss this with a qualified Iowa bankruptcy lawyer to find out how to prove undue hardship. And, depending on where the individual lives, the statue of limitations on claims like this can vary by each state’s laws. “It’s not that the law is without sympathy and a sense of compassion,” added Ahrenholz. “It’s just that they have a duty to ensure both sides in a bankruptcy proceeding get a fair shake.”
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
309 Court Ave., Suite 805
Des Moines, IA 50309
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.
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