Many people understand that filing for personal bankruptcy can give an individual a new financial start. However, there is much confusion about the details of the process, especially with the new law that was passed in 2005. One area in particular that causes much confusion is determining what can be eliminated through bankruptcy. The technical term, by the way for getting rid of debts through bankruptcy is called discharging debt. So, what kind of debts can be discharged in bankruptcy?
Well, you should know that there are certain types of debts that will not be discharged in bankruptcy. In most cases, child support debts, criminal fines, and back taxes will not be eliminated by declaring chapter seven bankruptcy. Likewise, student loans are usually not eligible to be discharged during bankruptcy.
Student loans actually deserve a little bit more discussion. It’s true that normally student loans are very difficult to get eliminated during personal bankruptcy. However, it’s not impossible, depending on the details of your situation. A judge would want you to prove what is called undue hardship. You have to prove that you would be unable to live a reasonable standard of living if forced to pay back the student loan.
You would also have to prove that your situation is unlikely to improve anytime soon, and that you have made a reasonable effort already to pay back your loans. Otherwise, getting rid of a student loan (particularly a federal loan which is either given or backed up by the federal government) is highly unlikely. Determining whether your situation qualifies as undue hardship is ultimately up to the judge.
Fortunately, credit card debt is probably the most common problem for those seeking to declare bankruptcy. Well, I don’t mean that it’s a fortunate thing that so many people are buried in debt. What I mean is that credit card debt is dischargeable during bankruptcy, provided you are approved for bankruptcy to begin with. Other common debts include medical bills and car payments. These types of debts help to push people over the edge and declare bankruptcy, and they are usually eliminated during the process.
It’s important to note that there are multiple types of bankruptcy. Chapter seven bankruptcy is the one that most people think of and is designed to eliminate most (or possibly all) of your debt. The other major form of bankruptcy is chapter 13, which seeks to create a repayment plan to ease your burden (but does not eliminate your debt).
Why not get free advice from a professional? Schedule a free, no-obligation call with a bankruptcy attorney today. (877) 212-7608