Bankruptcy FAQ n3

Bankruptcy is one’s inability to pay off debts to his creditors long after the due date. In such cases, an individual may opt to declare in the court that he is bankrupt and get his debts written-off. But as always it is easier said than done and in the same way, bankruptcy also offers a lot of hassles and concerns. This is a set of certain frequently asked questions to eliminate any doubts with regards to bankruptcy and the process.

1. What happens to my assets if my ex-spouse files for bankruptcy after our divorce?
A: In case you are a co-signer for the debt which your ex-spouse has taken during the period you were married, then you are responsible for the debt if he files bankruptcy. In such cases, the creditor of the loan and the court will tend to expect you to be responsible for the entire payment of the loan even after your divorce. This condition is valid even if your divorce decree assigns the full debt of the loan to your ex-spouse. Alternatively you can choose to have defined means of recourse mentioned in your divorce decree taking into consideration any loan default situations.

2. If I have co-signed a loan for another person who has now declared bankruptcy. Will I be responsible for the debt?
A: Yes, you will be. Co-Signing a debt indicates that you vouch for the debtor and that you will handle any failure by him to meet the loan obligations. Hence when the principle person of a loan declares bankruptcy, you would become the next responsible person to meet the loan. This is one reason why careful consideration is required before co-signing a loan for another person. Be prepared to pay the loan in the event of any default by the principle debtor.

3. Can all types of debts be discharged?
A: Normally bankruptcy is declared by an individual who is unable to pay his creditors to be discharged of all debts. But not all debts can be discharged by means of bankruptcy, and slight variation of debts that cannot be discharged from can be seen with respect to different bankruptcy chapters.
Debts of taxes that are payable to the local, federal or state agencies cannot be discharged. The official receiver makes an initial list of all debts before submission to the court and any debt not included in this list cannot be discharged. Also he carries a thorough investigation on the nature of each debt transaction and the bankrupt individual will not be discharged from any transaction that is found to be fraudulently obtained.
You will also not be able to discharge any debts that is owed to your spouse, ex-spouse or your child for the purpose of alimony, support or maintenance based on any order of a court. Also debts that have to be paid for injury caused to another person or their property as ordered by the court and those that have been imposed by the court to be paid due to death or personal injury inflicted on another person due to driving under liquor or drugs cannot be waived off and need to be paid.
The court also requires you to pay any government sponsored loans that have been taken and discharge is given only it is proved that severe hardship is required for loan payment. The bankruptcy clause discharges and individual only from the debts that have been incurred before the time of bankruptcy declaration and not after it have been filed. Also any kind of legal judgement needs to be paid by the bankrupt person and there is no available waiver on it.

4. Will I be allowed to retain any of my assets or properties on filing bankruptcy?
A: Though you are expected to furnish all details of your assets and properties and the court seizes all assets and accounts, it still allows you to retain any asset that is essential and required for a normal living standard. The court permits you to keep a vehicle less than £2500 value for daily work purpose. You can also retain any tools and equipment that are required for your business or work to be continued. The laws also state that you can hold a certain amount of jewellery and equity in your home property and also the court provides up to a year time to sell a family house to make alternate plans for your spouse and children.

5. At the time of filing bankruptcy, should I file for all the accounts I owe or am I eligible to keep some?
A: When you file bankruptcy, you need to declare all your debts and assets in your petition. You can however choose to ‘reaffirm’ the debt and keep it to you after declaration of bankruptcy.

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