If you've racked up a lot of debt, you aren't alone. Many people have more bills than they can afford, and many feel like they can’t get out from under a mountain of debt. Luckily, bankruptcy is a process that allows most debt to be discharged. If you’re thinking about filing for bankruptcy, check out what types of debt you can and can't have discharged.
Credit Card Bills
Many Americans have credit cards with outstanding balances they can never repay. The interest rates are often so high that the minimum payment only covers the interest. Luckily, nearly all credit card debt can be discharged during bankruptcy.
However, if you obtained the credit card with false information, you cannot have it discharged. Similarly, if you recently used the credit card for luxury goods or to withdrawal cash, you may not be able to discharge that amount.
Medical bills are another common reason people consider bankruptcy. If you don't have insurance, medical bills can rack up to thousands, tens of thousands or even hundreds of thousands of dollars.
Luckily, these are also considered non-secured debt like credit card bills, so you can include them in your Chapter 7 or Chapter 13 bankruptcy. If you do file for Chapter 13, keep in mind, you will have to repay some of the debt amount in a repayment plan.
A third major financial stress for many Americans is school debt. College is expensive, so even if you repay your school loan every month, you may have to pay monthly payments for years to come. Unfortunately, school loans are almost impossible to discharge during bankruptcy.
You can possibly get school loans discharged, but this depends on very specific circumstances involving your past, current, and future financial situation. First, you need to have a history of repaying your school debt regularly before you file. You also need to prove that the loan will prevent you from enjoying a basic standard of living for a long time.
If you can prove this undue hardship, you may be able to discharge student debt.
If you own property, such as a home or a vehicle, you can exclude or include them in your file for bankruptcy. Normally, people exclude this property to protect their home or car, but only if they can continue paying the mortgage/loan after their other debt is wiped.
If you do include the property in the bankruptcy, you will just end up giving up the property. Therefore, you will no longer owe the money for the loan, but you also won’t have your property anymore.
Some people may have fees from criminal cases, such as a DUI charge. These fees and penalties can add up quickly, but you cannot always have them discharged during bankruptcy. Court fees associated with these crimes are also not typically dischargeable.
For the most part, if your criminal fines are a punishment for your actions, you can't have the money discharged. On the other hand, if the money is a reimbursement fine, it can be included in your bankruptcy case.
Finally, another major expense for many people is child support. This is considered a domestic obligation (along with alimony), and if you don't pay it monthly, you can suddenly owe thousands of dollars in back pay to your ex-spouse or child's caregiver.
This back money cannot be discharged with bankruptcy. Similarly, bankruptcy cannot alter the alimony or child support agreement, such as lowering the amount.
Debt is pervasive, and you can get into it easily. Many American struggle with bills they can't afford. Bankruptcy is designed to eliminate most debt,so you can start again, but not all debt can be discharged. If you would like to know more about Chapter 7 and Chapter 13 bankruptcy, contact us at Kalasnik Law Office today.