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Discharging Debt in Bankruptcy

Are you presently dealing with crushing debt? If so, bankruptcy may help you get the fresh start you desperately need. When you file for bankruptcy relief, you are legally declaring that you cannot repay your debts, and in effect, the bankruptcy discharge makes it so creditors can no longer collect a debt from you.

As a consumer, you will likely file Chapter 7 or Chapter 13 bankruptcy depending on the types of debts you have and your income.

Chapter 7 and No Asset Bankruptcy

Chapter 7 allows debtors to discharge or wipe out most types of debts, particularly if they are unsecured. While some Chapter 7 debtors are required to sell their valuable assets, such as a house or vehicle to file a Chapter 7, most Chapter 7s are “no-asset bankruptcies,” which means the debtor is not required to sell anything. Often, debtors’ assets are exempt from liquidation.

Chapter 7 bankruptcy is reserved for low-income filers; not everybody will qualify. If your income exceeds the limits for a Chapter 7, you will be reverted to filing a Chapter 13, which is known as the “debt reorganization bankruptcy.”

Chapter 13 and Debt Repayment

Chapter 13 bankruptcy does not require that debtors liquidate their property, but it does require that debtors pay off all or a portion of their debts over a period of 3 to 5 years. For this reason, Chapter 13 filers must have a steady source of income coming in; for example, from a regular 9 to 5 job.

Many of the people who file Chapter 13 are employed homeowners who are trying to save their house from foreclosure. When they file Chapter 13, they can save their home while getting several years to catch up on their mortgage debt.

Which Debts Can Be Included in Bankruptcy?

Now that you have a better understanding of Chapters 7 and 13, let’s take a look at which types of debts can be included in a bankruptcy discharge.

The following types of debts can be discharged in bankruptcy:

  • Utility bills
  • Cell phone bills
  • Medical bills
  • Personal loans
  • Credit card debt

However, not all debts can be discharged in bankruptcy, including:

  • Student loans
  • Spousal support
  • Child support arrears
  • Recent income taxes (less than 3-years-old)
  • Court-ordered fines and victim restitution

If you’re having difficulty making ends meet, speaking to an attorney is essential. At Nguyen Law Group, we can answer your questions and help you decide if bankruptcy is right for you. While bankruptcy can be stressful, it doesn’t have to be with our firm’s help.

Contact us today for bankruptcy representation in Rancho Cucamonga and Mission Viejo.