Did you ever wonder that does bankruptcy clears bank debts? If yes then what kind of debts? If not then why not? If these questions arise in your mind then no need to worry we got you covered. Our team of experts did a lot of research on this topic which is why today I could write this informative yet exciting article for you. Hence we are here to explain everything related to your question “Does bankruptcy clear bank debt?”
We have covered not only the question you asked does bankruptcy clear debts or not but we have more on the list so that you can get a clear image of what is going around you. So let us get started without wasting any time and so I would suggest you just read the article one time. You will get your answer by yourself. First, let us discuss what bankruptcy is and what are its types.
What is Bankruptcy?
Okay, First thing first do you know what exactly bankruptcy is? If you don’t then do not worry we got your back here buddy! So, basically, bankruptcy is a type of legal system that allows various individuals or businesses like big MNCs who are unable to pay their debts to eliminate or restructure their debts through the court system. Let me put it simply for you the goal of bankruptcy is to provide relief to various individuals or businesses like big MNCs who are unable to pay their debts and give them a new chance to start their business.
Let me guess you’re now wondering how bankruptcy work, right? Do not worry mate we got your back, let me put it in a very simple manner so that you can understand how bankruptcy actually works on ground level and does bankruptcy clear the bank debts or not. At first individuals or businesses like big MNCs who are unable to pay their debts go to federal court and file a petition there to declare them as bankrupt which initiates a legal process to address the debtor’s debt. Once the petition is filed then the court passes an automatic stay order which stops the creditors from attempting to collect the debt from the individuals or businesses like big MNCs who are unable to pay their debts while the bankruptcy case is going.
There are various types of bankruptcy which are depending on the condition or situation of the individuals or businesses like big MNCs who are unable to pay their debts and their goals. Some bankruptcy involves liquidation of the assets of the individuals or businesses like big MNCs who are unable to pay their debts to pay off the creditor’s money. While some other bankruptcy cases involve reorganization of the assets of the individuals or businesses like big MNCs who are unable to pay their debts to pay off the creditor’s money. This might be a little bit confusing for you now but do not worry mate we got your back covered we will going to discuss types of bankruptcy cases according to the federal system which will help you to get a clear image of bankruptcy. In general, bankruptcy has serious harmful consequences for your credit score so we would suggest you consult a good bankruptcy lawyer who can help you to get out of this situation.
If we have to answer your question does bankruptcy clear your debts then yes it does clear most of your debts but some debts cannot be waived off by bankruptcy that we are going to discuss in further sections of this article.
Types of Bankruptcy
There are various types of bankruptcy that are mentioned in United States Bankruptcy Codes. But if we start discussing all the codes then we will go off track with your question “Does a bankruptcy clear bank debt?” So we are going to discuss only those bankruptcies which are important from the perspective of individuals or business like big MNCs who are unable to pay their debts.
1. Chapter 7 Bankruptcy
This is a type of liquidation bankruptcy in which the court liquidation the debtor’s assets so that they can easily pay off the creditors. There are various assets that are exempted from liquidation under various state and federal laws. A Chapter 7 bankruptcy is mostly used by those individuals or businesses like big MNCs who are unable to pay their debts with little or no debts and an unsecured amount of debt.
2. Chapter 11 Bankruptcy
This is a type of reorganization bankruptcy in which the court orders businesses to restructure their debt and operations so that they can continue their operations. So basically we like to say that Chapter 11 bankruptcies allow the debtor to propose a reorganization plan which will help them to pay their debts to the creditors over a duration of time.
3. Chapter 13 Bankruptcy
This is also a type of reorganization bankruptcy which is used by individuals who have regular income instead of a business and they are struggling with huge debts. In general chapter 13 bankruptcy has serious harmful consequences to your credit score so we would suggest you consult a good bankruptcy lawyer who can help you to get out of this situation as soon as possible. In chapter 13 bankruptcy the debtor proposes a reorganized repayment plan that outlines how they will repay their debts over a period of three to five years.
4. Chapter 9 Bankruptcy
This is a type of bankruptcy that is only available to municipalities such as cities and counties. This is also a type of reorganization bankruptcy that allows municipalities like cities and counties to restructure their debts and operations so that they can continue to provide essential services to their residents without any delay.
5. Chapter 12 Bankruptcy
This is a special type of bankruptcy that is provided to families of farmers and fishermen. This is also a type of reorganization bankruptcy that allows families of farmers and fishermen to reconstruct their debt and operations. This is special because, after approval of the federal court, the families of farmers and fishermen can continue operating their businesses so that they can earn their livelihood without any problems.
As we said earlier there are lots of bankruptcies that are mentioned in United States Bankruptcy Codes. If we start discussing all of them then you might get bored so let us skip the rest and move to our next section where we tell you which debts are waived off if you went bankrupt.
Debts That Can Be Cleared in Bankruptcy
The types of debts that can be cleared in bankruptcy totally depend on your type of bankruptcy. If we say on a generalized note then these types of debt can be cleared in bankruptcy like Credit card bills, medical bills, personal loans, unsecured lines of credit, lawsuit judgment (with some exceptions), certain tax debts (with some exceptions), utility bills, overdue rents, business debts.
Now we would like to tell you some facts about your question “Does bankruptcy clear bank debt?” There are some debts that cannot be cleared even by bankruptcy. These debts include a child support system, alimony payments, and certain tax debts. The court may pass a judgment to cease your cars or houses or any other assets which they found suitable as a form of collateral and bankruptcy may not eliminate the obligation to repay those debts.
The types of debts that can be cleared in bankruptcy totally depend on your type of bankruptcy. In general, bankruptcy has serious harmful consequences for your credit score so we would suggest you consult a good bankruptcy lawyer who can help you to get out of this situation.
Frequently Asked Questions (FAQs)
There are some questions people asked us so here we are with the answers to those questions.
Q1. What is collateral?
Collateral is basically those resources or assets which are used to secure a loan or a debt. When a borrower has to take out a loan then they have to provide collateral to the lender as a guarantee that they will repay the loan to the lender. Collateral can be anything like houses, cars, pieces of jewelry, etc.
Q2. What is the liquidation of assets?
Liquidation of assets basically means when a bank or court sells your collateral on the basis of which you secured a loan to repay the debts. This is generally done in Chapter 7 of bankruptcy. The trustee will sell the assets and use the proceeds to pay off as much of the debtor's unsecured debts as possible. Any remaining debts will be discharged, or eliminated, by the court
Q3. What is reorganization in bankruptcy?
Basically in a reorganization, the bank or court restructures the debt and operations of individuals or businesses like big MNCs who are unable to pay their debts so that they can continue their operations and also pay the debt to the creditors. This is generally done in Chapter 11 of bankruptcy. Reorganization bankruptcy can be a complex and time-consuming process, and it is recommended that anyone considering filing for bankruptcy consult with a qualified bankruptcy attorney to discuss their options and determine whether reorganization is a viable option for them
Conclusion
Glad to see you made it to the end of the article. I hope you got all the answers to your questions by now. There are a lot of people who ask us various questions related to does bankruptcy clears bank debts. So we did a lot of research to answer all of your questions in one place and hope you get answers to all these questions.
In conclusion, I would like to say that yes bankruptcy can clear bank debts. The types of debts that can be cleared in bankruptcy totally depend on your type of bankruptcy. If we say on a generalized note then these types of debt can be cleared in bankruptcy like Credit card bills, medical bills, personal loans, unsecured lines of credit,), utility bills, overdue rents, and business debts. But keep in mind that there are various other debts that cannot be cleared.
Now we are happy to see you at the end of the article, I hope you got all the answers you were looking for at the beginning of the article. We tried our best to answer all your questions with the most simplified answers but still, if you have any doubts regarding our article feel free to ask questions in the comment box. We will try to reach you as soon as possible. Do share this article with your friends and family, especially with those who want to know how bankruptcy clears bank debts.
