The goal of filing under Chapter 7 bankruptcy is to have your debts discharged or wiped out. Most types of debts can be discharged when filing for Chapter 7 bankruptcy; however, some debts are not eligible to be discharged.
What is a Discharge of Debt?
A discharge of debt is when your financial responsibility of your debt is waived, or removed. If granted a discharge, you are no longer legally required to pay back the debt and the creditor cannot attempt collection actions against you.
However, even when a secured debt is discharged, if a lien was placed against your property and that lien was not made unenforceable during your bankruptcy case, then the creditor is able to enforce the lien and repossess the property. Secured debt is a loan that is guaranteed by collateral or any asset that can be taken if you were to default on the loan. Common secured debts are loans for homes or cars.
It is also important to note that not all debts can be discharged.
Common debts that can be discharged are:
- Credit card charges (including any fees or interest)
- Medical bills
- Collection agency accounts
- Past due utility bills
- Business debt
- Personal loans from family, friends, or employers
- Deficiency balances
- Past due rent
- Civil court judgements
- Social Security overpayments
- Veteran’s Assistance loans or overpayments
- Revolving charge accounts
- Certain taxes
- Auto accident claims
- Bounced checks
- Certain attorney fees
According to the Bankruptcy Code there are 19 categories of debt that are not eligible for discharge, some of which are listed below. Also, any debt incurred because of fraudulent acts are non-dischargeable and if a creditor successfully objects to a discharge of debt then you are still liable for it.
- Child support
- Alimony, spousal support, or other debts owed to a spouse or child
- Student loans (except in rare circumstances)
- Debts to government agencies
- Certain taxes
- Court sanctions including criminal restitution
- Attorney fees in child or spousal support cases
- HOA fees
- Civil court judgements involving a DUI
- Tax advantageous retirement plans
- Unscheduled debts (not listed when you filed for bankruptcy)
If you have any questions regarding your bankruptcy case or which of your debts are dischargeable, contact our office for a free case evaluation.