Does bankruptcy mean that you are financially ruined forever, and, if not, how can you rebuild your finances? Is bankruptcy an invisibility cloak that protects you from creditors, even while you continue to spend beyond your means? Did you hear about the deadbeat dad who declares bankruptcy every time he gets a divorce, just so his exes will stop pestering him for money? Bankruptcy law in Alabama is a lot more nuanced than you might think if you only know about it through advertisements, the boasts of charlatans, and the grumbling of people who have lent their money too naively. In some cases, it is still possible for a creditor to collect a debt from a debtor who has declared bankruptcy. To find out more about your chances of collecting a debt after the person who owes you has declared bankruptcy, contact an Alabama creditors’ rights attorney.
What Debtors Owe Even Ever They Declare Bankruptcy
Not all debts disappear the minute the person who owes them files for bankruptcy or the minute that a court declares that person bankrupt. The following debts cannot be discharged by filing bankruptcy; in other words, the creditor can still collect them:
- Tax debts
- Child support and alimony
- Fines imposed as criminal penalties
- Fines for traffic violations
- Damages the debtor has been ordered to pay in a civil lawsuit related to personal injury or wrongful death caused by drunk driving
Some types of debts fall into a gray area, where bankruptcy cases sometimes erase them, but in other cases, creditors may still attempt to collect them from the bankrupt debtor:
- Bankruptcy normally does not erase student loan debt, but sometimes the bankruptcy court will discharge the debt if it causes undue financial hardship to the debtor.
- If the creditor can demonstrate that the debtor obtained the loan by fraud, then the court can choose not to discharge it.
- If the debtor did not specifically list the debt on the petition for bankruptcy, the creditor may still be able to collect it.
- If the debtor borrowed more than $1,150 or bought more than $1,150 of luxury goods on credit within 60 days of the bankruptcy filing, the creditor may still collect the debt.
- If the debtor is going through a divorce and declaring bankruptcy would cause the debts to become the responsibility of the debtor’s ex-spouse, thus causing undue financial hardship to the ex-spouse, the court may continue to hold the debtor responsible for those debts.
The short answer about whether you can still collect a debt from someone who has filed for bankruptcy is “it depends.” A creditors’ rights attorney can help you find ways to collect money owed to you while staying within your legal rights.
Let Us Help You Today
If someone who owes you a debt has filed for bankruptcy, do not despair; you might still be able to get the money. Contact the Alabama creditors’ rights attorneys at Cloud Willis & Ellis for a consultation.