The most frequent question I get asked at my bankruptcy law firm in Asheville, North Carolina office is a good one: What types of debt will be discharged in my bankruptcy case?
In Chapter 7, most people are able to keep all of their belongings, and eliminate the following types of debt:
1. Credit Card Debt – Credit cards are general unsecured debts which can be eliminated completely
2. Medical Debts – Also general unsecured debts which can be eliminated completely
3. Personal Loans – These can be tricky if security has been pledged. Most of the time, we can achieve a full discharge because the debt is either wholly unsecured (no value in property) or grossly undersecured.
4. Old Taxes – A debtor must be very careful with old tax debts because the bankruptcy code was changed in 2005 to describe which types of income tax debt is and is not dischargeable. A good starting point is that most tax debts must be at least 3 years old to be dischargeable.
5. Any debt which you no longer want the security – If you have a house or car you can no longer afford, you can eliminate your liability on the debt by surrendering the property to the creditor and filing a Chapter 7.
Here is a summary of debts which are generally not dischargeable:
1. Recent Tax Debts – see above
2. Student loans – In very rare circumstances, a client can file a lawsuit to apply for a ‘hardship discharge,’ but most of the time, the student loan debt survives in Chapter 7
3. Secured Loan Debts – Although the underlying debt is discharged in a Chapter 7 (unless reaffirmed), if you want to keep a house or car secured by a mortgage or car loan, you must continue to make payments even after your Chapter 7 case.
4. Alimony and Property Settlements in Divorce – Most of the time, these types of obligations survive a Chapter 7 case.
Each situation is different, and initial consultations for bankruptcy are available at no charge. For people needing a bankruptcy attorney in Asheville NC, I would be pleased to speak with you during a free, initial consultation.
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