If you are considering filing for bankruptcy, it may be because you have too many monthly payments to manage. You’re expected to pay out more than you earn, and it’s simply not sustainable. This isn’t due to frivolous spending—your debt has become unaffordable, and you want to eliminate it so the payments will stop.
However, it’s important to understand that there are situations where you may still need to make payments even after filing for bankruptcy. Let’s look at a few examples.
Using Chapter 13 bankruptcy
Chapter 13 bankruptcy works differently from Chapter 7 bankruptcy, which focuses on liquidating assets to pay off debts. With Chapter 13, your debts are consolidated, and you’re given a repayment plan that may last up to five years. You will still need to make these payments, but the plan spreads out your debt to make it more manageable and affordable.
Tax debts
In many cases, tax debts cannot be discharged through bankruptcy. However, the IRS may allow you to address these debts using methods like an offer in compromise or by setting up a repayment plan with the government.
Student loans
Additionally, bankruptcy often cannot be used to discharge student loans. If student loans make up a significant portion of your debt, you may still be required to make payments on them, even if your bankruptcy filing is otherwise successful. In this case, the goal of bankruptcy is to reduce other debts so that you can afford your student loan payments again.
Understanding your obligations
Bankruptcy can be a valuable tool for managing debt, but it comes with certain complications. It’s essential to understand what legal steps to take and what obligations you may still have after filing.