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Chapter 7 bankruptcy is a powerful debt relief tool that allows borrowers who are unable to meet their financial obligations to completely discharge most unsecured debts. There are some debts that can’t be eliminated, which is why it’s important to speak with a bankruptcy attorney before filing (or even locking into a debt relief option). Below is an overview of the types of debts eligible for discharge as well as what you may still be responsible following bankruptcy.

What Debts Can Be Discharged?

bankruptcyConsumer debts, including credit cards, store charge accounts, and lines of credit, can typically be discharged in a bankruptcy. Chapter 7 bankruptcy can also relieve the burden of medical bills.

Lawsuit judgments are also eligible for discharge, unless they’re related to a DUI accident, as are attorney’s fees, and even Social Security overpayments. Even unpaid tax obligations can be eliminated by bankruptcy, provided that the debts are at least three years old and you have not been convicted of fraud.

Non-Dischargeable Debts

While Chapter 7 bankruptcy can eliminate your personal obligation for a secured debt, it doesn't release the creditor’s claim/lien upon on the property (“collateral”). For instance, you may no longer personally owe a lender for your car loan, but the lender may still be able to repossess your vehicle if you don’t make payments. The same is true for mortgages and any other loan secured by a piece of property.  It is sometimes possible to “redeem” collateral for its value, without paying the full balance of the debt. Relief from the personal obligation of a debt on “underwater” assets can be very beneficial in itself as well.  (Chapter 13 provides additional options for dealing with secured debt beyond those available with a Chapter 7.) 

Some unsecured debts are also specifically exempt from discharge, such as unpaid child and spousal support, criminal fines and penalties, and student loans. Any debts you owe to a child or former spouse because of a divorce are also exempt, as well as attorney’s fees related to child support and custody cases.  Depending on your particular circumstances, if you’re struggling with non-dischargeable debt, your bankruptcy attorney may recommend considering a Chapter 13 instead (or as well).

If you’re faced with unmanageable debt, the bankruptcy attorneys at Ferguson, Hayes, Hawkins & DeMay, PLLC will help you wipe the financial slate clean. They have over 90 years of collective experience serving borrowers throughout Downtown Concord, NC, providing effective legal service and compassionate treatment. Visit their website for more on their debt relief services, or call (704) 788-3211 to consult with a bankruptcy attorney today.

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