What Bankruptcy Can and Cannot Do

Bankruptcy may make it possible for a financially distressed individual to:

• Discharge liability for most or all outstanding debts and get a fresh start. When the debt is discharged, the debtor has no further legal obligation to pay it.
• Stop a home foreclosure action and gain the opportunity to catch up on missed payments.
• Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
• Stop wage garnishment and other debt collection harassment, and get some breathing room.
• Restore or prevent termination of utility service.
• Lower the monthly payments on debts, including secured debts such as car loans.
• Challenge the claims of certain creditors who have committed fraud or who are otherwise seeking to collect more than they are legally entitled to.

Bankruptcy cannot cure every financial problem. It is not possible to:

• Eliminate certain rights of secured creditors. Although a debtor can force secured creditors to take payments over time in the bankruptcy process, a debtor generally cannot keep the collateral unless the debtor continues to pay the debt.
• Discharge certain payment obligations identified in the federal bankruptcy statutes for special treatment, such as child support, alimony, some student loans, certain court ordered payments, criminal fines, and some taxes.
• Protect cosigners. If a relative or friend co-signed a loan which the debtor discharged in bankruptcy, the cosigner may still be obligated to repay the loan.
• Discharge debts that are incurred after bankruptcy has been filed. This is a very important consideration when determining the timing for filing a bankruptcy petition.