Not all the debts of yours shall be discharged. In cases of bankruptcy, there is a provision to seek help to release off your debts; however, this is not applicable for each of your debts. Thus, it is essential to understand and distinguish between the debts that can be discharged and those that cannot be.
Discharging a debt implies that the debt is being released off your shoulders. It might sound nice. However, it has its drawbacks. The disadvantage associated with debt discharging is that your credit report has in it this detail, and it stays with you for a couple of years.
However, in cases of bankruptcy, if nothing else works, you can resort to filing cases in the court, indicating the same. But not all debts shall be discharged.
Hence, before filing for bankruptcy, have a thorough understanding of this aspect. This article deals with this aspect. You can read lots of articles on sites like HuffPost to get informed on what debts shall be discharged and what not.
Two chapters deal with debt discharge that is followed by bankruptcy. They are chapters seven and thirteen. Both of these have different definitions and laws coming into it. They can be detailed in the following excerpts.
Debts that are discharged in chapter 7
Under this chapter, most of the debts can be discharged once filed for bankruptcy. However, it is to be noted here that all those debts that persisted before you filed the bankruptcy under chapter 7 shall be subjected to discharge. All the other, if any, which came after the filing, will not get into this account.
But here you must clearly understand that it does not mean that you will be in debt again. It is just that you will be held responsible for all those debts that followed after you filed for bankruptcy.
There are some debts that shall be discharged once you filed for bankruptcy. They are listed below.
- Hospital bills
- Credit card bills
- Utility bills
- Any accounts possessed by debt collectors
- The extra amount that exists after repossessions
- Claims on personal injury. However, drunk-driving posed accidents are exempted from this category.
- Back checks exempting the fraudulent checks
- Rent arrears, lease fees
- civil lawsuit order exempting fraud cases
- Penalties and back taxes
- Overpaid social security benefits and veteran assistant loans
- Business credit
- Charger account balances
Debts discharged in chapter 13
The mode of debt discharge is a bit different from how chapter seven treats it. Here, the process of release of debts does not take place right away. Instead, a repayment period of a reasonable duration between three to five years, depending on the circumstances, shall be given. Once the repayment period is completed, the amount of debt that remains shall be released.
The debts that can be discharged as per Chapter 13 covers most of the obligations that can be released by chapter seven. In addition to that, some other cases can be issued under chapter 13 and not in section 7. They are listed below.
- The debts associated with deliberately destroying your property can be discharged. But this will not hold for these debts if a severe injury occurred to another person on this account. Those debts shall persist.
- In instances of getting into debt to pay off, some non-dischargeable debts shall be discharged. An example of a non-dischargeable debt is student loans.
- Debts associated with divorce and separation agreements can be discharged. Spousal support and child support debts shall be exempted from this. However, attorney fees can be included in this category.
- Homeowners with home equity loans or in possession of second mortgages shall be benefited by section 13. If the sum owned is higher than the worth of the first mortgage. These debts can be stripped off.
Two chapters deal with the debt discharging procedure once a bankruptcy is filed, namely seven and thirteen. Thus, before submitting the case and approaching the court, one must be aware of which all debts can be discharged under which chapter. Go through the debts that can be released under sections 7 and 13. Choose a suitable one as per your situation.
An essential point that you must remember is that being honest about your debts while filing for bankruptcy matters a lot. Also, if there are any debts that you did not indicate, either purposely or ignored accidentally, they will not be considered for release.
Before you are approaching court and filing bankruptcy, you must inform your cosigners. This is because they will be held accountable for the entire debt sum. If you took the whole money, you must repay them as it is your burden. However, if you shared your cash with your cosigners, do your part by repaying your fraction and laying the rest to them.
Though it seems promising, one must resort to filing for bankruptcy unless and unless there are no other options left.