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Consumer: What is Bankruptcy? (FAQs)

Authored By: Legal Aid of North Carolina LSC Funded

FAQ

What is Bankruptcy?

Bankruptcy is a legal proceeding in which a person who cannot pay his/her bills can stop all CREDITORS from collecting debts from you, at least, until the court sorts the debts accordingly by law.

By filing bankruptcy, you may:

  • Eliminate the legal obligation to pay your debts. This is called “discharge.”

  • Stop foreclosure on your house or mobile home and allow you time to catch up on missed payments.

  • Prevent repossession of property such as a car. 

  • Stop action by creditor to collect a debt.

  • Restore or prevent termination of utility services.

In bankruptcy it is usually not possible to

  • Eliminate the rights of creditors who are secured. (Creditors who have a lien on property as collateral for a loan).

  • Discharge or eliminate certain debts, such as, child support, alimony, most student loans, court restitution orders, criminal fines, taxes.

  • Protect cosigners on your debts. If you discharge a loan in bankruptcy the cosigner may still have to pay.

 

See Quick Facts Consumer: What is Bankruptcy? for more info.

 

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Last Review and Update: Jul 02, 2012