What Types Of Debt Can Be Discharged In A Chapter Seven Bankruptcy?

When debts become overwhelming and it is not possible to pay them back as promised, sometimes bankruptcy is the only option. For those who are unable to withhold some of their property and continue paying for it, filing chapter seven bankruptcy may be the best choice. However, discharging your debt depends primarily on what type of debt you have. These are the most common types of debt that can be discharged when filing chapter seven bankruptcy.

Unsecured Debts 

Unsecured debts are normally discharged in a chapter seven bankruptcy. This includes medical bills, credit cards, unpaid utility bills, personal loans and back rent that has not been paid. However, your landlord does still have the right to evict you even if you have back rent discharged in bankruptcy court.

However, there are some situations where unsecured debt will not be discharged. If the debt was obtained through any type of misrepresentation, the bankruptcy judge can refuse to let you have it discharged. For example, if a debt is obtained by lying about the creditors income amount, the person obtaining it will be not be allowed to have it discharged.  

Court Judgments 

It is not uncommon for those who file bankruptcy to have already been sued by a creditor and have a judgment ordered against them. However, since the person does not have the financial resources to pay the debt, he is unlikely to have it after a judgment has occurred.

Although, if the court judgments involve nonpayment of child support, back taxes or student loans, these may not be able to be discharged. In some cases, student loans may be discharged if the person filing can prove that it would place an extreme financial hardship on them to pay them back.

Secured Debts 

Secured debts may be discharged in a chapter seven bankruptcy as long as you surrender the property that the debt was used to purchase. This includes vehicles, furniture, appliances, jewelry and any item that was obtained with the debt. 

Although, sometimes it is possible to keep property that is part of your secured debt. If the creditor neglected to put a lien on a vehicle and the value of it is less than the amount that is deemed for the vehicle exemption, you may be able to keep it. Smaller financed items may also be kept if the creditor does not feel it is worth the time and cost of repossessing it.

While each individual case may vary, chapter seven bankruptcy was designed to give those who are suffering financially the chance to make a fresh start. Once a person has had their debt discharged through bankruptcy, it is best to avoid going into debt as much as possible so this problem will not reoccur.

For further assistance, contact a local bankruptcy attorney, such as Thomas A Blake.