Bankruptcy is a powerful legal tool that can erase many types of debt, including credit card debts and medical bills. However, not all types of debt can be erased through bankruptcy.
If you are exploring if bankruptcy is the right solution to your debt problem, it is important for you to know which of your debts can be erased and which cannot.
Debts that You Will Not Owe After Bankruptcy
Dischargeable debts are debts that can be erased through bankruptcy.
The most common debts that are dischargeable include: credit cards, medical bills, personal loans, utility bills, certain older tax liabilities, and other types of credit or loans that were given without a collateral requirement.
After a successful bankruptcy, you will not owe your debts that are discharged in your bankruptcy. You will no longer be legally obligated to pay back your dischargeable debts. These debts are totally erased through bankruptcy and those creditors will never legally be able to attempt to collect payment from you.
Debts that You Will Owe After Bankruptcy
Nondischargeable debts are debts that cannot be erased through bankruptcy. You will still owe your nondischargeable debts after bankruptcy.
The most common debts that are nondischargeable include: student loans, spousal or child support payments, certain tax liabilities, fines imposed from a government body, most criminal fines, penalties, and restitution orders, money borrowed by fraud or false pretenses, and drunk driving injury claims.
This list is by no means exhaustive. Due to either the type of debt you owe, or when or how it was incurred, you may have other debts that are also nondischargeable.
Even after a successful bankruptcy, you will be legally obligated to pay back your nondischargeable debts. Those creditors retain whatever legal rights are available to them to collect on the debt owed to them.
Secured Debts After Bankruptcy
The treatment of secured debts after bankruptcy can be confusing.
Secured debts are debts backed by collateral, such as your mortgage or car loan. After a successful bankruptcy you will not be personally liable to pay back the secured debt, but in the absence of a court order stating otherwise, the debt is still secured by the collateral.
This means that the secured creditor cannot sue you after bankruptcy to collect on the debt (unless you signed a reaffirmation agreement), but the creditor retains its right to seize and sell the collateral to satisfy the debt. A mortgage lender can foreclose on the house; a car loan lender can repossess the car.
If you want to keep your house or car after bankruptcy, you must continue making the payments even if your personal liability on the debt was discharged through bankruptcy.
If you want to keep property that is collateral for a secured debt, like your house or car, you will need get caught up on any missed payments and continue making the monthly payments during and bankruptcy. Also, maintain any required insurance and understand that you may have to reaffirm the loan.
Understand that every bankruptcy case is different. Speak with an experienced bankruptcy attorney to understand which of your debts, if any, you will still owe after bankruptcy.
Explore How Bankruptcy Can Help You
The purpose of filing for bankruptcy is to get a handle on your debt, so it is critical to understand what bankruptcy can and cannot do for you.
At the Law Office of Barbara B. Braziel we are committed to helping people get out of debt and gain the financial freedom they deserve. We invite you to learn more about who we are here. If you live in Savannah, GA or the surrounding areas and have questions about your debt relief options, let’s meet for a free consultation.
Call us today at (912) 351-9000 or contact us to schedule a free consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.