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Bankruptcy: Commonly asked questions

People in Washington, D.C., and elsewhere file for bankruptcy for a number of reasons. They often approach the process unsure of which chapter to file and which debts can be discharged. Asking the right questions ahead of time can make the process easier. Here are a few of the most common questions regarding bankruptcy.

What do the different chapters of bankruptcy mean?

An individual looking to manage personal debt will most likely be filing for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy liquidates assets and discharges debts while Chapter 13 bankruptcy sets up a payment plan that a filer must follow for three to five years in order to pay off all or a portion of their debt.

Can bankruptcy save my home from foreclosure?

Filing bankruptcy, whether Chapter 7 or 13, will stay a foreclosure, which means your lender must temporarily stop the foreclosure process. If you file for Chapter 13, which manages debt using a payment plan, your mortgage arrears will also be included. That means that over the next three to five years, you can pay back your overdue mortgage payments and keep your home.

Will my student debt be discharged in my bankruptcy?

Americans are facing amazingly high amounts of student debt, partly because of the soaring cost of higher education and poor job prospects for graduates. Unfortunately, student debt is usually not dischargeable. Only in instances where the debtor can prove that paying off the debt will cause extreme hardship will the debt be discharged. The burden of proof is hard to meet.

If my former spouse files for bankruptcy, will that discharge our shared debt?

Not necessarily. If one spouse incurred debt and then files for bankruptcy, their debt will be discharged. If it is a shared debt, bankruptcy will not discharge it. If a marital agreement is the cause of debt, such as missed alimony payments, bankruptcy will not usually erase those debts.

Source: York Daily Record, " GGA attorney answers top bankruptcy/debt questions," Lauren Boyer, Mar. 21, 2012

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