What Does “Fresh Start” Mean in Bankruptcy?
When bankruptcy services are being advertised, the expression, “fresh start” appears frequently.
“Fresh Start” refers to the legal and bankruptcy filing process, which is designed to help individuals who are unable to repay their creditors. An individual may choose to file bankruptcy to get a “fresh start,” and liquidate assets or create a viable repayment plan to repay creditors.
Filing for bankruptcy means going through the process of reorganizing finances. An individual who files pays creditors what they can afford by using income or non-exempt assets. Debts are discharged through bankruptcy, and are no longer enforceable after an individual files.
This alleviation of liability is often called a “fresh start.”
As the United States Supreme Court documented in 1934:
“[Bankruptcy] gives to the honest but unfortunate debtor… a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Those words are as true today as they were over 80 years ago.”
After a bankruptcy case has been resolved, there are often few debts owed or none at all. This is because a bankruptcy discharge protects an individual from any future collections.
As long as you abide by the terms of your bankruptcy, you will be discharged from all of your unsecured debts and, depending on which chapter you file, many (if not all) of your secured ones.
A Chapter 7 filing will eliminate unsecured debts like credit cards, medical bills, and personal loans. While it won’t erase nondischargeable debts like child support, spousal support, or federally-guaranteed student loans, relief from your unsecured debts often leaves you with enough income to pay them down. With Chapter 13, you can pay off all debt (usually at a lower amount) in a three to five-year plan, after which you are discharged.
What A “Fresh Start” Does Not Mean
The majority of debts are discharged after filing bankruptcy, but there are some limitations.
Some debts are excluded (and not discharged) such as child support, student loans, and taxes.
A “fresh start” should not be interpreted as “erasing” past debt. Rather, discharge of debt is known as an injunction that makes any prior debts unable to be collected.
The past debt can still appear on credit reports, but collection from creditors are stopped the day that bankruptcy is filed. In some cases, this does not prevent creditors from seeking alternative solutions. Common avenues creditors may pursue are liened property or co-debtors who did not file for bankruptcy.
If you are struggling with debt and need a “fresh start,” consult with an experienced bankruptcy attorney. The bankruptcy law is powerful protection and can discharge debts permanently. A bankruptcy fresh start may be just the thing you need for a new financial beginning.
Contact the Bankruptcy Attorney Team at Maxwell Dunn PLC
For those who are struggling with debt could benefit from a “fresh start,” consult with an experienced bankruptcy attorney. The bankruptcy law is powerful protection and can discharge debts permanently. Schedule an appointment by contacting one of our attorneys.