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Do You Get Out of All Debts if You Declare Bankruptcy?

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If the weight of overwhelming debt looms over you, declaring bankruptcy might seem like an alluring escape hatch. However, bankruptcy isn’t so straightforward. One thing many people don’t know is that there are debts that are not discharged in bankruptcy, which means you will still be held accountable for them after the process is complete. This blog will provide an overview of what debts are and are not eliminated through bankruptcy.

Understanding Bankruptcy

Bankruptcy is a process intended to help individuals or businesses struggling with debts they cannot repay. Most individuals file primarily two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy, often called “liquidation bankruptcy,” involves selling your assets to pay off creditors. Chapter 13 bankruptcy gives people with a steady income an opportunity to create a payment plan to repay all or part of their debts. In both cases, the ultimate goal is to eliminate as much debt as possible.

Debts Discharged in Bankruptcy

Bankruptcy can lead to the discharge of certain debts, which means you are no longer legally required to pay them. Some dischargeable debts include:

  • Credit card debt: Unpaid credit card balances can be discharged through bankruptcy, providing relief from financial obligations.
  • Medical bills: Accumulated medical expenses can be discharged, helping individuals alleviate the burden of medical debt.
  • Personal loans: Debts from personal loans can be discharged, offering a fresh start to those struggling with loan repayments.

Debts Not Discharged in Bankruptcy

Some types of debts cannot be discharged in bankruptcy, including:

  • Student loans: In most circumstances, student loans are not forgiven in bankruptcy unless you prove that repayment would cause undue hardship.
  • Taxes: Certain types of taxes, such as federal income taxes, cannot be discharged in bankruptcy.
  • Child support and alimony: Debts related to child support or alimony are not dischargeable in bankruptcy.
  • Court fines and penalties: Any fines or penalties imposed by a court are not eligible for discharge through bankruptcy.
  • Debts incurred through fraud or illegal activities: If you obtained a debt through fraudulent or unlawful means, it cannot be discharged in bankruptcy.

Why Are Some Debts Dischargeable and Others Not?

The bankruptcy system is designed to give individuals a fresh start by eliminating debt they cannot realistically pay off. However, some debts are considered too closely tied to personal responsibility and cannot be discharged. For example, child support and alimony payments support the financial well-being of children and ex-spouses and are therefore not dischargeable. 

On the other hand, dischargeable debts are often considered unimportant and do not have as significant an impact on individuals’ lives. While stressful and burdensome, credit card debt is not seen as crucial to an individual’s well-being and can be eliminated through bankruptcy.

Why You Need Legal Representation

Bankruptcy proceedings can be complicated and overwhelming, especially when you’re already struggling with debt. That’s why it’s crucial to have solid legal representation on your side. Experienced bankruptcy attorneys can walk you through the bankruptcy declaration process, help determine what debts are dischargeable, and ensure that all necessary steps are taken for a successful outcome.

Find Debt Relief Today

Don’t let the fear of overwhelming debt and complex legal proceedings hold you back. Take control of your financial future and seek strong legal representation to help you navigate bankruptcy. Contact Whitten & Whitten today to schedule a consultation and find out how we can help you achieve debt relief.

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