When contemplating bankruptcy, it's important to know what kind of debts you can expect to have forgiven. In bankruptcy language, debts that disappear with a filing are known as discharged. It's in your best interest to have as much debt as you can be discharged when you file your chapter 7 bankruptcy. For a summary of how a bankruptcy filing might deal with some common debts, read below.
It can be easy to accumulate medical debt. Many people have insurance but have to meet high deductibles and co-pays. Unfortunately, some are not insured at all and can incur an overwhelming amount of medical debt. To make the burden worse, medical debt collection activity can be aggressive. Fortunately, medical debt falls into a category that is almost always discharged with a filing.
Credit Card Bills
It can be easy to accumulate a lot of credit card debt before you know it. Often, consumers are unable to pay even the minimum balances on their bills. When they fall behind, the phone calls begin. The best way to stop the harassing collections activity is to file for chapter 7 bankruptcy. Upon filing, the phone calls must stop. Also, credit card debt is almost always discharged when you file.
Unlike the above categories of debt, some are more complicated. Anytime property is associated with a loan, the holder of the loan has the power to take that property back if the bills are not paid. That means homeowners and vehicle owners need to continue to make payments on their loans even after they file if they don't want to lose their property. Speak to your bankruptcy lawyer about how to handle your secured debt load.
Some bankruptcy filers are reluctant to include personal loans or signature loans on their bankruptcy. They are often, however, dischargeable. In many cases, the consumer has a personal relationship with the creditor and is too embarrassed to include it. Even handshake loans can be included, however. If you have borrowed money from a lending institution for any reason and there is no property securing it, it can probably be discharged.
Contracts, Agreements, and Services
A filing might automatically make certain types of contracts null and void. For example, if you've entered into a contract to buy a home, that contract is no longer valid. Some common forms of debts that are trickier — if not impossible — to discharge are back child support, student loans, legal debts, back taxes, and others.
Speak to a bankruptcy lawyer about your debts and chapter 7 bankruptcy right away.