If you are burdened with overwhelming debt and struggling to keep up, filing Chapter 7 bankruptcy may be your best course of action, depending on your circumstances. Many individuals who file for Chapter 7 are able to wipe out the majority or even all of what they owe; however, there are some debts that even Chapter 7 cannot eliminate. Below, Ron Lunquist, Attorney at Law, explains which types of debt Chapter 7 bankruptcy discharges.
What Is Bankruptcy Discharge?
A discharge in bankruptcy is the desired outcome of the entire bankruptcy filing process. When your debts are discharged in a Chapter 7 bankruptcy case, you are released from personal liability for those debts. A discharge also prevents your individual creditors from taking any further collection actions against you, including:
● Telephone calls
● Wage garnishments
● Lawsuits
Once your debts have been discharged, you essentially have a clean slate, save for a few types of debt that we’ll discuss next. You can then begin the process of rebuilding your finances and re-establishing financial security.
Common Types of Debt Eliminated in Chapter 7 Bankruptcy
Chapter 7 bankruptcy only eliminates specific types of debt, known as dischargeable debts. For most individuals, dischargeable debts fall into the following common categories:
● Credit card charges (late fees and overdue balances included)
● Medical bills
● Balances owed on collection accounts
● Past due amounts on utility bills
● Personal loans
● Deficiency balances after repossession
● Funds owed under lease agreements (past due rent, etc.)
● Business debts
● Civil court judgments
● Unpaid taxes and tax penalties (discharge of these debts depends on their age)
● Revolving charge accounts (extended payment charges excepted)
For more information on the basics of Chapter 7 bankruptcy and the types of debt it can eliminate, check out uscourts.gov.
Categories of Debt That Chapter 7 Cannot Eliminate
Though filing Chapter 7 bankruptcy can wipe out the majority or even all of your debt, depending on what you owe, there are certain types of debt it cannot touch. If you file Chapter 7 and receive a discharge at the conclusion of your case, you’ll still be liable to repay the following types of debt:
● Specific types of unpaid taxes, including tax liens
● Child support and alimony
● Debts associated with willful and malicious injury of another person
● Debts associated with personal injury or death of another person resulting from the debtor’s operation of a motor vehicle while under the influence
In most cases, filing Chapter 7 bankruptcy will also leave you liable for repaying your student loans. Under certain circumstances — if you can prove repaying your loans would cause you undue hardship — student loan debt may be discharged.
Considering Chapter 7 Bankruptcy?
If you’re saddled with overwhelming debt, don’t hesitate to get in touch with Ron Lunquist, Attorney at Law. For over 20 years, I’ve proudly served the legal needs of Twin Cities residents, and I’m here to help you start fresh, too. To schedule a free consultation or learn more about how I can help you get out of debt and begin the process of rebuilding your finances, call my Eagan, MN office today at 651-454-0007. You can also send me a message with your questions, and I’ll be in touch promptly.