How Debt Is Treated in Bankruptcy
How Debt Is Treated in Bankruptcy
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Debt Discharge in Bankruptcy: Nondischargeable Debts
You can wipe out or “discharge” most debt types in Chapters 7 and 13, including credit card balances, medical and utility bills, home and car loan payments (if you return the house or vehicle to the lender), and personal loans. But bankruptcy doesn’t discharge all obligations. Nondischargeable debts include most student loans and taxes; fines, penalties, and criminal restitution; and domestic support obligations. Debts incurred through fraud; obligations the filer didn’t list correctly; some loans owed to stock, bonus, profit-sharing, and retirement plans; and debts related to operating a vehicle under the influence of drugs or alcohol also are nondischargeable in bankruptcy.
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Unsecured Debt: Priority vs. Non-Priority
Whether you file for Chapter 7 or Chapter 13 bankruptcy, it's important to determine which of your unsecured debts will be classified as priority debts and which will be assigned to the nonpriority category.
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Student Loans in Bankruptcy: The Brunner Test
Getting student loans discharged in a Chapter 7 bankruptcy case is very difficult. For the most part, you must show that repayment would cause you "undue hardship."
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How Medical Bills Are Treated in Chapter 13 Bankruptcy
Although you must repay some of your medical debts in Chapter 13 bankruptcy, you do this through the protection of your Chapter 13 repayment plan.
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Will Bankruptcy Stop the IRS From Collecting Tax Debts?
The automatic stay will stop the IRS from collecting taxes debt that you owe once you file a Chapter 7 or Chapter 13 bankruptcy. But depending upon the nature of the tax debt you owe, the IRS may be permitted to collect from you later.
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Secured vs Unsecured Debt in Chapter 7 Bankruptcy
What happens to your debts in Chapter 7 bankruptcy depends on whether they are secured or unsecured.
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Debts You Can Wipe Out in Chapter 13 Bankruptcy
Many debtors file for Chapter 13 bankruptcy to reorganize their debts and catch up on their missed mortgage or car loan payments through an affordable repayment plan. If you successfully complete your repayment plan, you will receive a bankruptcy discharge that wipes out your personal liability.
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What Happens to Your Timeshare and Timeshare Debt in Bankruptcy?
If you own a timeshare and are considering filing for bankruptcy, you likely want to know what will happen to your timeshare. Can you keep it? Will the trustee take it? What happens to a timeshare mortgage and other related timeshare debts in bankruptcy? Learn why the answers depend on the type of timeshare you own, the value of your timeshare, and whether you choose to file for Chapter 7 or Chapter 13 bankruptcy.