As soon as a debtor files for bankruptcy, the court puts into place an “automatic stay.” This automatic stay prevents creditors from taking any action to enforce any debts without permission of the court. The creditors can then file a motion asking the Bankruptcy Court to lift the stay with regard to the debt they wish to collect. While an automatic stay can give a debtor some temporary breathing room, it has no effect on non-dischargeable debts, other than to delay their collection. Some types of debt collection that can be affected by a bankruptcy filing are:
If you and your spouse plan to file for divorce, you may wish to file for bankruptcy prior to filing for divorce, as the bankruptcy can simplify the marital estate by wiping out a significant amount of debt. Additionally, once the automatic stay is in place, the property in the marital estate (all the property acquired during the course of the marriage) cannot be distributed until the Bankruptcy Court makes a ruling that the property is “exempt.” Exempt property is not part of the bankruptcy estate and cannot be used to satisfy debts.
Back rent is one of the unsecured debts that is often discharged, at least in part, during the course of a bankruptcy. However, while filling for bankruptcy may temporarily delay an eviction, a Bankruptcy Court is not likely to put off an eviction indefinitely, even if the back rent debt is discharged in whole or in part. The reason for this is that a Bankruptcy Court will not force a landlord to continue to house a tenant who cannot pay rent.
Generally, tax debts cannot be discharged in bankruptcy. However, in limited circumstances, a Bankruptcy Court may grant a total or partial discharge. In order to have tax debt discharged, a debtor must meet the following five rules:
An automatic stay does not prevent a debtor charged with a crime from being charged, tried, or sentenced, though it may temporarily delay a payment of restitution while the court determines that the debt is non-dischargeable. Debt arising out of criminal acts or as ordered as part of a criminal sentence (such as restitution for a crime) is not dischargeable in bankruptcy.
In general, unsecured debts, such as credit cards, medical bills, and legal fees are subject to the automatic stay and, eventually, dischargeable, in whole or in part. However, legal fees incurred by the debtor in hiring an attorney to represent him in the bankruptcy proceeding are generally paid out of the bankruptcy estate.