Secured Vs Unsecured Debt

Bankruptcy for Secured and Unsecured Loans

Filing Bankruptcy Can Discharge Secured and Unsecured Loans

Before a lender makes the decision to loan money to an individual, they must evaluate a consumer’s credit history. Once the preliminary screening has been done, the lender has a choice to lend to consumers under two main categories: secured and unsecured debt. It is important to understand the differences between secured and unsecured debt if you are planning on applying for a loan, or filing for bankruptcy, so you can understand what financial options are available to you.

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Student Loan Debt Forgiveness

Filing Bankruptcy for Student Loan Debt

Student Loans and Bankruptcy

In Bankruptcy law, there are many myths about what you can and cannot discharge when filing for bankruptcy. One of the biggest myths in bankruptcy today is that when you file for bankruptcy and attempt to have your debt discharged, student loans are impossible to discharge. While student loans are typically exempted from discharge, it is possible to have the Bankruptcy Court make a determination that the student loans pose an undue hardship.

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Chapter 7 vs. Chapter 11 Bankruptcy

Los Angeles Bankruptcy Attorney

Talk to a Los Angeles Bankruptcy Lawyer

When faced with debt and the inability to pay back all creditors, American citizens or businesses are able to file for bankruptcy based on their financial situation. Chapter 7 bankruptcy is, in general, an overall liquidation of assets, while Chapter 11 bankruptcy is a basic reorganization or rehabilitation bankruptcy. Chapter 7 bankruptcies often result in a Chapter 7 Trustee attempting to sell off a Debtor’s assets to pay off creditors, while Chapter 11 leaves an individual or corporation in control of their assets and allows them to negotiate with creditors to alter or cure the loan payment terms, in an attempt to have debts paid back without forcing a liquidation of assets.
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Crumbs Bakery Files Chapter 11 Bankruptcy

Crumbs Files Chapter Eleven Bankruptcy

Large American Company Files Bankruptcy

The cupcake chain, Crumbs Bake Shop, was forced to shut down its operations this past July after several years of dwindling sales, and rising debt. Crumbs filed for Chapter 11 bankruptcy protection and was recently looking to hold an auction to see if anyone was willing to make a bid to buy the company. This past week a bid was made by television personality Marcus Lemonis and Dippin’ Dots owner Fischer Enterprises. Lemonis and Fischer Enterprises’ bid of $6.5 million dollars was unmatched and eventually accepted. The auction was deemed unnecessary because no other investors came forward with a bid of their own. Suppliers for Crumbs Bake Shop and landlords of closed locations are looking to receive around $870,000 dollars to settle debts, according to court documents.
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Can You File Bankruptcy on Taxes Owed

can bankruptcy cover irs taxes

Filing Bankruptcy to Stop the IRS

If you have past due federal taxes and the IRS has begun the collection process, filing for bankruptcy may be a viable option. If you decide to pursue bankruptcy to settle your tax debt, several steps must first be taken.

  1. You you should  file all required tax returns for tax periods ending within four years of your bankruptcy filing.
  2. While your bankruptcy is underway:
    • You must continue to file all necessary returns.
    • You need to pay all current taxes as they are due.

Not all tax debts are dischargeable through bankruptcy. Older income tax obligations with a return due within the past three years are more likely to be discharged. A Chapter 7 bankruptcy wipes out your dischargeable tax debts, with the exception of priority taxes. If you owe priority taxes Chapter 7 bankruptcy will only provide you with temporary relief from IRS collectors while the automatic stay is in effect.
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Top 10 Bankruptcy Myths

  1. People who file for bankruptcy are financially irresponsible.

    FALSE

    • Individuals and corporations file for Chapter 7, Chapter 11, or Chapter 13 bankruptcy for a large variety of reasons.  These reasons are often related to unexpected, and, in many cases, unpreventable, expenses.
    • For example, individuals may need to file bankruptcy due to unexpected medical bills or a sudden death in the family.  Filing for bankruptcy can also often be necessary after a divorce.
    • Corporations may need to file commercial bankruptcy under Chapter 7 or Chapter 11 because one of their largest customers suddenly went out of business or business slowed down due to sudden changes in their industry such as the financial meltdown in 2008.
  2. Bankruptcy discharges all past debts

    FALSE

    • Not all debts are discharged in bankruptcy.  Certain debts receive a priority in bankruptcy proceedings such as: IRS and Franchise Tax Board liens against real property or certain IRS and Franchise Tax Board debt that was incurred within the last 3 years.
    • Other Debts that cannot be discharged include certain claims for past wages owed to employees, domestic support obligations such as alimony and child support, certain fines or penalties owed to the government, and debts related to fraud or other types of wrongdoing.
    • This is not a complete list of all debts that cannot be discharged in bankruptcy.  For specific questions on whether or not a specific debt can be discharged in bankruptcy, speak to a Los Angeles bankruptcy attorney today.

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