What Are the Types of Debts That Can Be Addressed Through Bankruptcy?

 Posted on April 12,2022 in Bankruptcy

There are many different types of debts that can cause a person or family to experience financial difficulties. In many cases, these difficulties occur because of circumstances that are out of a person’s control. For example, a person who suffers a serious injury or illness may have received multiple different forms of medical treatment, resulting in high medical bills that they are unable to pay. These problems can become even more serious if a person has been unable to work and earn enough income to cover their living expenses while also repaying the debts they owe. Fortunately, different forms of debt relief may be available, including filing for bankruptcy. Those who are considering bankruptcy will need to understand how different debts may be handled and how different types of bankruptcy may be used to provide financial relief.

Dischargeable and Non-Dischargeable Debts

Filing for bankruptcy can provide some immediate relief from debts through what is known as the “automatic stay.” After a bankruptcy petition is filed in court, this stay will go into effect, and it will prevent creditors from taking any actions to collect debts. Any collection activities will be halted during the bankruptcy case, and creditors will be prohibited from contacting the debtor in any way. The debtor will then be able to determine how to handle different types of debts throughout the bankruptcy process.

A Chapter 7 bankruptcy will generally allow a person to discharge their debts within a few months, and once these debts have been discharged, the debtor’s obligations to creditors will be removed. Most types of debts are dischargeable through bankruptcy. Unsecured debts such as credit card balances and medical bills may be eliminated. Secured debts such as home mortgages or auto loans may also be discharged; however, creditors will usually be able to seize the collateral used to secure these debts. To avoid this, debtors may choose not to include secured debts in their bankruptcy, or they may reaffirm certain debts and agree to make continuing payments following the completion of their bankruptcy.

There are some debts that cannot be discharged through bankruptcy. These include most types of tax debts and student loans, as well as family support obligations such as child support and spousal support. However, even though these debts cannot be eliminated, bankruptcy may allow a person to make up payments that are past due and ensure they will be able to continue paying off these debts in the future.

Contact Our Charlotte Bankruptcy Attorney

If you have questions about how your debts will be handled during a bankruptcy case, or if you want to know more about the best steps you can take to receive relief from your debts, Blossom Law PLLC can advise you of your options. We will work with you to complete the bankruptcy process successfully and ensure that you will be able to meet your family’s needs. Contact our Mecklenburg County bankruptcy debt discharge lawyer at 704-256-7766 to set up a free consultation today.

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics

https://www.investopedia.com/ask/answers/102814/what-debt-cannot-be-discharged-when-filing-bankruptcy.asp

 https://www.experian.com/blogs/ask-experian/credit-education/bankruptcy-how-it-works-types-and-consequences/