Filing for Bankruptcy: Which Debts Will Be Forgiven and Which Ones Won’t?

Bankruptcy claims are an effective way to eliminate debt and become debt-free. The cases present claimants with an opportunity to discharge certain debts completely, and the creditor cannot attempt to collect any further money from the consumer. Once the debt is discharged, the consumer won’t have to pay it as long as they complete their bankruptcy claim as directed.

What Bankruptcy Won’t Forgive
Claimants often get confused on what types of debts that the bankruptcy court will discharge through their chapter 13 or chapter 7 cases. First, bankruptcy doesn’t eliminate any overdue child support or alimony payments, and if the claim doesn’t catch these payments up, they can face penalties in the family court. Any fines, penalties, court costs, or fees related to any criminal case will not be discharged through bankruptcy.

Any taxes that the claimant owes from previous tax seasons, property taxes, or business taxes are not discharged through bankruptcy. If they have loans through retirement plans or life insurance policies, the claimant remains responsible for these debts and won’t get them discharged. Additionally, any debts that are eligible for discharge that were not included in the bankruptcy will not get discharged.
Any government-backed student loans or business loans are not eligible for discharge through bankruptcy. In fact, it is very difficult for claimants to get any student loans discharged under any chapter of bankruptcy. Claimants can review the list of debts that aren’t eligible for discharge by visiting now.

What Can Be Discharged Through Bankruptcy?
The court starts with unsecured debts when it comes to discharges. Unsecured credit card accounts and personal loans can be discharged through chapter 7 and 13. Debts that are not secured by collateral such as an automobile or real property are eligible for discharge. Department store credit cards that are not secured are prime examples of debts that are discharged in bankruptcy.
Debts that have been charged off by the creditor or sent to collections are eligible for discharge. When a creditor charges off any account, they close the account, and they sell the account to a debt collector. The original creditor may also file an insurance claim to offset the loss caused by the debt. These debts are eligible for discharge in bankruptcy especially if they are smaller-than-average debts.

The Stipulations of Getting Debts Discharged
The claimant must complete all steps of their bankruptcy case to maintain the benefits of the discharge. If the claimant misses a payment in chapter 13, for example, the bankruptcy court can discharge their debts prematurely. If this happens the claimant must pay all debts included in their claim, and the creditors regain the ability to start legal action against the person.
The automatic stay is only valid while the case is active. If the court discharges the bankruptcy for non-compliance, the automatic stay no longer applies. Any claimant that doesn’t fulfill their responsibilities to the bankruptcy court will not retain any debt discharges presented in the case. They become responsible for all debts immediately.

Bankruptcy claims present consumers with an opportunity to discharge their debts and get help with their finances. The bankruptcy court provides several benefits to consumers, including an automatic stay to prevent creditors from taking legal action, and the court discharges certain debts. A discharged debt is no longer the responsibility of the claimant, and the creditor cannot take any further action against them to collect it.

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