Bankruptcy has the power to erase many debts, but it does not erase all types of debts. Many people come out of bankruptcy completely debt free. Other people have debts that must be paid back even after successfully filing for bankruptcy. If you’re considering filing for bankruptcy protection it is important for you to know which of your debts can and which cannot be erased.
Debts in bankruptcy are classified as either dischargeable or nondischargeable. Dischargeable debts can be erased through bankruptcy. Nondischargeable debts cannot be erased through bankruptcy and must be paid back.
Dischargeable Debts that Are Erased in Bankruptcy
- Credit card debt
- Medical debt
- Collection agency accounts
- Repossession deficiency balances
- Personal loans from family or friends
- Past due utility bills
- Certain judgments from lawsuits (and pending lawsuits)
- Older tax debts
- Some other unsecured debts.
If the majority of your debt balances fall into the above categories, then bankruptcy may be the right solution for you to get out of debt.
Nondischargeable Debts that Are Not Erased in Bankruptcy
- Spousal or child support obligations
- Fines imposed from a government body
- Debts incurred by fraud: debt for money, property, or services, to the extent such debt was obtained by false pretences, a false representation, or actual fraud.
- Debts resulting from illegal activity
- Certain tax debts, including new tax liabilities
- Certain debts incurred right before filing for bankruptcy: consumer debts owed to a single creditor totally more than $675 for “luxury goods or services” incurred within 90 days before filing for bankruptcy are “presumed to be nondischargeable.” 11 U.S.C. § 523(a)(2)(C)(i)(I).
- Student loans
This list is not 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. When it comes to bankruptcy, every case truly is unique.
If the majority of your debt balances fall into the above nondischargeable categories, then bankruptcy may not be the right solution for you. However, a Chapter 13 bankruptcy may be an option that could help you. It would allow you to create a three to five-year repayment plan for your debts.
Explore How Bankruptcy Can Help You
We’re 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.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code. Find out more about Bankruptcy in our guide: All About Bankruptcy.