Who wouldn’t want to be told that their debt can just go away? That what they owe has been forgiven, just like that? That’s what bankruptcy can offer for some. It can relieve you of your responsibility to pay those debts that you cannot pay, and it can make your creditors stop harassing you finally.
But bankruptcy can’t always discharge all the debts you owe. You need to talk to a Gilbert bankruptcy lawyer to understand how bankruptcy will benefit you, specifically, and what your rights and responsibilities are.
Debts that Can be Discharged under Chapter 7
Chapter 7 bankruptcy is the type of bankruptcy that people often have in mind when they think of bankruptcy. It is the “total liquidation” bankruptcy that discharges your debts when the filing is closed. Debts that can be discharged under a Chapter 7 bankruptcy include:
- Credit card debt
- Medical bills
- Personal loans, including those from banks and from family and friends
- Any other debts that are not backed by personal property
There is no limit on the amount of debt that can be discharged under Chapter 7 bankruptcy. So, if you have $100,000 in credit card debt, you can discharge $100,000.
Debts that Cannot be Discharged under Chapter 7
Unfortunately, Chapter 7 bankruptcy cannot discharge all of your debts, even if they are unsecured debts (not backed by property). Specifically, Chapter 7 bankruptcy will not discharge:
- Tax debts
- Any fines or penalties levied by the government (local, state, or federal)
- Unpaid child support
- Unpaid alimony
- Student loans
- Damages to personal property
- Money you owe for another’s injuries
You cannot get around paying the government, or anything that the government orders you to pay (such as criminal restitution or child support). There are some instances in which you can get your student loans discharged, but those instances are so uncommon that it is better to just move forward under the assumption that you will be paying back your student loans. Depending on your employment type and your degree, you may be able to get your student loans forgiven under certain programs.
Discharging Debts under Chapter 13
The rules are different for Chapter 13 bankruptcy. Instead of discharging your debt, this type of bankruptcy puts you on a debt repayment plan that you can actually afford. The bankruptcy court looks at what you owe, compares that to what you earn, and determines a monthly payment that won’t cause you financial distress.
Though the goal of a Chapter 13 bankruptcy is to get you to pay back what you owe, that may not be possible while also keeping you on an affordable monthly payment. Therefore, you may have some debt left over at the end of your repayment plan, and that debt may then be discharged. Those debts will be considered on a case-by-case basis. Your bankruptcy lawyer can give you a better idea of what to expect at the end of your Chapter 13 bankruptcy and what debts may be discharged.
Filing for bankruptcy can help you gain control of your finances by relieving you of your debt burden. Which type of bankruptcy will give you the most benefits depends on what type of debts you owe. If you have a lot of unsecured debts, a Chapter 7 bankruptcy filing will likely be the best choice for you. If you have a lot of debts that cannot be discharged, you should consider a Gilbert Chapter 13 bankruptcy filing to get your debts reorganized into a more affordable payment plan.
Call Gilbert Bankruptcy Lawyers if you are struggling with debt and are considering bankruptcy. A bankruptcy attorney from our team can help you better understand the ins and outs of Chapter 7 and Chapter 13 bankruptcy so you can determine which would be best for your financial circumstances. Our goal is to help you get the maximum debt relief possible so that you can start building a better financial future. Call our Gilbert bankruptcy law office today to schedule a consultation with an experienced bankruptcy attorney. We work with individuals and businesses who are interested in bankruptcy protection, and we handle all types of bankruptcy filings.