Although bankruptcy can give you a fresh financial start, it’s important to understand what types of debt you can and cannot discharge. Filing for Chapter 7 bankruptcy can help you regain your financial footing as long as most or all of your debt is dischargeable. Some examples of dischargeable debt are:
Credit Card Debt
Credit card debt is one of the most common financial obligations people aim to discharge in bankruptcy. Chapter 7 bankruptcy can eliminate both the principal amount and late fees that accrued as a result of missed payments.
Poor financial decisions are not the only way you can get into financial trouble. Health care expenses are one of largest causes of bankruptcy. Even those who have insurance can find themselves facing financial hardship after treating a severe illness or undergoing an extensive medical procedure.
If you are unable to keep up with utility bills, filing for Chapter 7 bankruptcy could be the answer. Doing so can wipe out past-due amounts and late fees. Be careful as some utilities may require a security deposit before offering new services and that security deposit might exceed what you currently owe on the account. This is not to say that you can omit debts from your case as everything must be listed, but if you region to pay a security deposit, it may be better to pay the balance before you file your case. You should consult with your attorney before making any such decision.
It is a common misconception that all student loans are not discharged by a bankruptcy. Not true! Some loans that you think are student loans may not be student loans at all. The definition of a student loan in bankruptcy is different from what people typically think of as a student loan. Even if it is a proper student loan, there is a mechanism for discharging it. Although the burden can be high, some lenders don’t bother to defend court actions to discharge the loan.
Unless your case involved drunk driving, filing for Chapter 7 bankruptcy can help you eliminate debt that arose as a result of a car accident claim. In catastrophic collisions, the costs of seeking medical treatment or replacing the vehicle can be astronomical, and many people do not have the means to cover them. If you are one of them, an experienced attorney can help you explore your debt relief options.
Even if you have waited too long to file a bankruptcy and a creditor has already obtained a court judgment against you, that judgment can also be discharged by a bankruptcy. Judgment liens against your home or attachments of your pay can also be undone.
Loans From Family And Friends
If you took out personal loans from friends, family, or an employer, you can discharge them by filing for Chapter 7 bankruptcy. However, it is important to consider the impact this may have on your relationship. In some cases, reorganizing your debt through Chapter 13 bankruptcy may be a better solution for getting back on your feet and preserving those relationships. Even if a Chapter 7 bankruptcy is appropriate, there is no restriction against repaying those debts owed to family and friends after the bankruptcy is over. There is a big difference between the legal and the moral obligation to repay.
While filing for bankruptcy does eliminate many forms of debt, there are some that cannot be discharged. These include certain tax debts, child support, alimony, and fines that you owe as the result of a criminal conviction. I can guide you through your options for resolving these financial obligations.
With over 35 years of experience, Eugene S. Melchionne Attorney at Law is the leading bankruptcy lawyer in Waterbury, CT. My dedication to my clients earned me a seat on the board of the National Association of Consumer Bankruptcy Attorneys, and led me to giving bankruptcy seminars throughout the country. To contact me, call (203) 757-3437 or reach out online.