What Types of Debt Can be Discharged by Bankruptcy?

TRI Writer • October 3, 2019

Are you looking for information on the benefits of bankruptcy? Do you need to stop creditors who are harassing you for payment? Are you struggling to make minimum payments? Chapter 7 bankruptcy may be just what you need to get a fresh start.

Filing for bankruptcy is a major decision that can have a significant effect on your life for years. You must understand what it can and cannot do for you. Before you decide to file for Chapter 7 bankruptcy, start by getting to know what types of debt are eligible for discharge.

Unsecured Debts: Debts that are not backed by collateral are unsecured debts. They are normally eligible for discharge in Chapter 7 bankruptcy. Examples of unsecured debt include the traditional revolving credit card, medical bills, utility bills, personal loans, back rent, etc.

Some Secured Debts: Secured debts can are eligible for discharge, but the attached lien does not go away. What this means for the debtor is that they can discharge a secured debt (like a house or a car), but they will need to give up the house/car to the creditor.

Types of Debts that are NOT Discharged in Chapter 7 Bankruptcy:  

Student Loans: Student loans are unsecured debt, but they are not eligible for discharge unless you can demonstrate that it is an undue hardship upon you or your dependents to repay the student loan. [We often counsel our clients on how to enroll in an income driven repayment plan, through the US Department of Education].

Debt Incurred through Fraud: Any debt incurred through or related to fraudulent activity is not dischargeable. Fraudulent activity can be as simple as buying items on credit with no intention of repaying the debt or falsely representing your income or assets to a creditor during the credit application process. We have extensive experience in assisting those who may have been accused of this type of activity. This is something that should be brought to your bankruptcy attorney’s attention during the initial consultation or interview.

Recent Luxury Purchases and Cash Advances: Some debts that are generally eligible for discharge will be deemed not eligible if the debt was incurred too soon before the bankruptcy filing. We often spot these types of transactions, and successfully avoid these problems using lawful pre-bankruptcy planning practices.

Lawsuit Judgments: While most money judgments are dischargeable, there are exceptions to the rule. It is usually best to file bankruptcy before receiving a lawsuit judgment. After a judgment is issued, a creditor has the right to put a lien against any personal property or real estate. Many liens do not go away due to bankruptcy.

Certain Tax Debts: Income taxes may be discharged under certain conditions, but unless particular conditions are met, the debt is not eligible for discharge.

There is no shame in seeking a discharge of debt when unintended circumstances leave you struggling to care for your family. When you are out of choices and need help to release your family from chains of debt, don’t hesitate to get in touch with Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.

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