Bankruptcy Information: Dischargeable Debts

Bankruptcy information that you need to know to decide whether or not to file is that not all debts are eligible to be discharged in a bankruptcy. When a debt is discharged by the bankruptcy process it is forgiven, so it is important to understand which types of debt can be forgiven and which types you will still owe during and after a bankruptcy. If you have more debt that is ineligible for discharge than is eligible, you may quickly decide that bankruptcy is not the right path for you.

Dischargeable Debt

In general you can expect that your personal, unsecured debt can be discharged in bankruptcy. Credit cards and medical bills are examples of unsecured debt that are frequently discharged in bankruptcy. There are some cautions to be aware of:

• Very recent credit card debt may not be dischargeable.
• If you run up your credit cards buying luxury goods or taking trips you could be accused of bankruptcy fraud.
• Personal debt that you forget to include on your list of creditors when you file bankruptcy won't be discharged in the bankruptcy.
• Although not common, your creditors do have the right to object to the bankruptcy discharge.
• As soon as you file bankruptcy an automatic stay is in place preventing your creditors from any further collections activity against you.
• Debt that you incur after you file for bankruptcy is not included and not discharged.

Not Dischargeable

There are many types of debt that are not dischargeable in bankruptcy including:

• Alimony or spousal support
• Child support
• Most current and back taxes
• Most types of student loans
• Fines that have been imposed by a court, as an example for a drunk driving conviction
• Court ordered criminal restitution to a victim

What About My House and Car?

If you have a mortgage and a car loan you may be able to keep those assets during and after your bankruptcy if certain conditions are met.  If you are current on those payments, the liens remain in place and you continue to owe those debts. As long as the equity that you have in your house and car don't exceed the maximum value of those allowed asset exemptions and you can continue to afford the payments, you may be able to keep your house and car.

If you are not current on your payments, and do not have the funds to bring the payments current or to continue to make the payments, then you are unlikely to be able to keep those assets after bankruptcy.

Get Legal Help

Bankruptcy is a big step, and there are many things that you need to take into consideration. Find an experienced local attorney who specializes in bankruptcy law and make an appointment to learn more about the laws in your state, and how bankruptcy will affect you. For hundreds of thousands of people each year bankruptcy is the best way to get a fresh financial start out from under crushing personal loan debt.