Maybe you got sick or injured, or perhaps you lost your job unexpectedly. If you’ve hit hard financial times and can no longer cope, there’s no shame in doing what it takes to get your life back. Chapter 7 bankruptcy may be the answer.
If you think you need to file for bankruptcy, speak with a qualified lawyer — you’ll need professial legal help to guide you through this complex process. However, you can still learn the basics on your own. This blog will show you what debts are and are not covered by a Chapter 7 bankruptcy.
Debts That Can Be Discharged
If a debt is discharged, it means that you are no longer legally responsible for the debt and the creditor can’t try to collect the money. In other words, the debt is dead.
Chapter 7 bankruptcy can discharge many types of debt, including the following.
If you have a secured debt, that means that when you borrowed the money you agreed that the creditor could take possession of your property if you didn’t pay. On the other hand, an unsecured debt does not have this stipulation.
Chapter 7 bankruptcy’s main function is to eliminate unsecured debts. If you have unsecured debts, like utility bills, medical bills, personal loans, unpaid rent and credit card charges, your Chapter 7 bankruptcy will most likely discharge these debts, giving you a fresh start so you can get back on your feet.
However, there are exceptions. If a person incurs credit card debt from luxury purchases, especially if those purchases were made very close to filing for bankruptcy, the creditor may successfully persuade the court that the debt shouldn’t be dischargeable. Speak with your attorney so you can know what to expect to happen to your debt.
If you lost a civil lawsuit and now owe the other party, this debt can probably be discharged. However, there are exceptions, such as if you caused a personal injury while driving drunk or if you committed fraud.
Debts That Can’t Be Discharged
Unsecured debts often are the most pressing concerns when people need to file for chapter 7 bankruptcy, and the bankruptcy should discharge them. However, there are many other types of debt. The following will not be discharged if you file for chapter 7 bankruptcy.
If you have a secured debt, like a mortgage or a car payment, the bankruptcy will not wipe it out. Your property may be repossessed if you cannot find a way to pay for it. However, if you surrender your property, then the debt will be considered discharged.
Keep in mind that there are exceptions. Talk with a lawyer to see if there is any way you can save property you bought with a secured debt.
Debts Not Included in Your Filing
If you forgot to include some of your debts when you filed for bankruptcy or if you incurred debts too close to your filing, then those debts may stick with you. Make sure to speak with a lawyer before you file so that you have the best chance of getting as much debt as possible discharged.
If you owe child support or alimony, the courts will not discharge the debt. You’ll still owe your ex-spouse or children every penny.
Occasionally but rarely, those who file for bankruptcy can get student loans discharged if they prove that paying them back would be an “undue hardship.” However, the vast majority of student loans survive the bankruptcy process. If you have student loan debt, plan on paying it in full.
If you owe taxes to the government, they probably won’t be discharged. In the case, a Chapter 13 may be the way to go. Ask your attorney which chapter of bankruptcy best fits your needs.
If you live in the Wilmington area, call James S. Price Bankruptcy Attorney. Our team can talk you through what to expect from chapter 7 bankruptcy so you have the best chance possible of a brighter financial future.