When facing financial hardship and considering bankruptcy, the fate of your existing agreements becomes a major concern. Bankruptcy attorneys play a crucial role in navigating this complex area, ensuring you understand how bankruptcy proceedings will impact your financial obligations. Here’s a breakdown of what bankruptcy attorneys can tell you about agreements and their standing in bankruptcy:
Executory Contracts: These are ongoing agreements where both parties still have outstanding obligations. Common examples include car leases, apartment rentals, and gym memberships. The bankruptcy code grants the debtor the person filing for bankruptcy the right to either assume or reject the contract. Assuming the contract means continuing the agreement and fulfilling all future obligations. Rejecting it allows the debtor to terminate the agreement and walk away, though the creditor the other party may have claims on the already used portion of the service or good. An attorney will analyze the contract’s terms, potential benefits and burdens, and advise on the most strategic course of action for your financial situation.
Debt Reaffirmation Agreements: In some cases, debtors may choose to keep certain beneficial contracts, like a car lease on a reliable vehicle needed for work. However, since bankruptcy typically discharges most unsecured debts, the creditor might no longer be obligated to uphold the original terms. To ensure continued access to the good or service, a debtor can enter into a debt reaffirmation agreement. This is a new agreement made outside of bankruptcy court, reaffirming the original contract’s terms. An attorney will meticulously review the agreement to ensure it is truly advantageous and would not create undue hardship after bankruptcy.
Secured Debts: Secured debts involve collateral, like a house or car, that the creditor can repossess if payments are not made. While bankruptcy can discharge the personal liability for the remaining debt after the collateral is sold, it would not prevent repossession. An attorney can advise on strategies to potentially save your secured property, such as negotiating a loan modification with the creditor or using funds from Chapter 13 bankruptcy repayments to catch up on missed payments.
Tax Obligations: Bankruptcy generally does not discharge most tax debts owed to federal and state governments. However, there are exceptions depending on the type of tax and how old it is. An attorney will delve into your tax situation to determine discharge ability and explore options like filing amended tax returns or negotiating an installment plan with the tax authority.
Student Loans: Discharging student loan debt through bankruptcy is notoriously difficult. An attorney can advise on the specific circumstances under which it might be possible, such as proving undue hardship and Contact Freedom Law. They can also explore alternative solutions like income-driven repayment plans that might ease the burden.
Child Support and Alimony: These court-ordered obligations to support dependents are not dischargeable in bankruptcy. An attorney will ensure you understand your ongoing financial responsibilities related to child support and alimony, even after bankruptcy.
Pre-petition Debt vs. Post-petition Debt: Debts incurred before filing for bankruptcy are considered pre-petition debt and are generally subject to discharge. However, debts incurred after the filing, called post-petition debt, are not automatically discharged and must be paid in full. An attorney will meticulously review your financial activities to ensure you understand the distinction and avoid accidentally accumulating dischargeable debt during the bankruptcy process.
