While filing bankruptcy is often considered one way of getting out of crippling debt, it’s typically reserved as a last resort. It does provide you the legal assistance you need to recover from a financial crisis, but it doesn’t come without a cost. Before you consider bankruptcy, here are a few facts your attorney will want you to know.

Will All of Your Debt Be Forgiven?

While most debt will be forgiven, certain types of debt cannot be eliminated when filing bankruptcy. Typically, unsecured debt, such as medical and credit card bills, will be erased. You will still have to repay other types of debt, such as taxes, child support, or spousal support. The court may outline a payment plan to help you meet those obligations.

How Do Chapter 7 & 13 Bankruptcies Differ? 

In a Chapter 7 bankruptcy, the court can liquidate certain assets to help you pay a portion of the debt owed to your creditors. The rest of your debt will be discharged, but you must show that you will have no means to pay that debt in the foreseeable future. 

In a Chapter 13 bankruptcy, you’re required to create a repayment plan and submit it to the court. Your plan must include your income and a strategy for repaying your creditors. The court will help you determine how much debt must be repaid by evaluating your income, your total debt, and the equity you hold in your property.

Does Your Spouse Also Have to File for Bankruptcy?

Everyone’s situation is different, so the answer to this may vary based on your circumstances. You should ask your family law attorney if you live in a community property state. If so, any debt acquired by either you or your spouse during the marriage may be shared by both partners. Even filing for divorce may not prevent the debt from being passed onto your spouse after the bankruptcy. In this situation, you may choose to file together to protect one another. Any shared debt will likely fall to the other spouse, unless you file for bankruptcy jointly. Kentucky, for example, is not a community property state, so only voluntary assumed debts, such as by co-signing a loan, will hold the spouse accountable.

Navigating the bankruptcy proceedings can be difficult. Luckily, Lonneman & McMahan, PLLC in Elizabethtown, KY, can help you resolve your financial troubles. They can review your financial situation with you to help you determine the best course of action for filing bankruptcy. Visit their website to learn more about the services they offer, or schedule an initial consultation by calling (270) 765-2190.