Chapter 7 Bankruptcy provides for the discharge of several types of debts, but exceptions exist so read on…
Let’s start with some examples of the types of debts that Chapter 7 Bankruptcy will successfully discharge: medical bills, most credit card debts, vehicle repossessions, utility shut offs, home foreclosure deficiencies, and most unsecured personal loans.
Next, let’s consider some of the non-dischargeable debts. The following types of debts are generally non-dischargeable in a Chapter 7 Bankruptcy, meaning that these debts may survive the bankruptcy process and still be due and owing after your Chapter 7 Bankruptcy is concluded:
- Child support and other domestic support obligations
- Student Loans
- Recent income taxes
- Certain debts incurred just prior to filing for bankruptcy
- Criminal restitution
- Court fines and court costs
- Most secured loans (UNLESS you are surrendering the collateral)
While you can discharge your mortgage and car loan, many people find that they cannot live without either and choose to continue paying on these particular loans. This is called a reaffirmation. Reaffirmation Agreements allow you to keep the property and continue making payments, however reaffirmation agreements should be in writing and timely filed with the Bankruptcy Court. In the event that a mortgage company or auto loan lender will not issue a reaffirmation agreement, then “retain and pay” is a possibility and worth a conversation with your lender. Those debtors who choose retain and pay are advised to speak with an attorney about the pros and cons with retain and pay and to keep all payment receipts.
Bottom line: While most debts are eliminated in a Chapter 7 bankruptcy, it is possible that some will survive. A thorough bankruptcy consultation with an experienced attorney should help resolve any of your doubts.