What debts can be discharged in a Chapter 7 Bankruptcy?

Filing for Chapter 7 bankruptcy is a viable option for individuals who are struggling with debt and need relief from creditors. But many are unsure of what debts can be discharged in a Chapter 7 filing. In this blog, we’ll discuss the types of debt that can be discharged in a Chapter 7 bankruptcy and the benefits of discharging these debts. 

Introduction

Before discussing the types of debt that can be discharged in a Chapter 7 bankruptcy, it’s important to understand what Chapter 7 bankruptcy is. Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a way for individuals to discharge their debt by selling off certain assets to pay creditors. Personal bankruptcy is a legal process that allows individuals who are overwhelmed with debt to get a fresh financial start. It enables them to restructure or eliminate certain types of debt and, in some cases, can even help them keep their homes and other property.

Types of Debt

When it comes to debt, there are several types that can be discharged in a Chapter 7 bankruptcy filing. These include secured debt, unsecured debt, priority debt, and non-dischargeable debt. 

Secured debt is a type of loan that is backed by collateral, such as a car loan or a home mortgage. If the borrower defaults on the loan, the lender can take possession of the collateral. Unsecured debt is a loan that does not have any collateral securing it; examples include credit card debt, medical bills, and personal loans. 

In Bankruptcy, unsecured debts are further divided into two additional categories—priority and general unsecured debts.  Priority debt is a type of unsecured debt that has legal precedence over other types of debt in a bankruptcy filing. Priority debts include child support payments, alimony, and certain taxes. Most priority debts are non-dischargeable, meaning they can’t be eliminated in a bankruptcy filing. Student loans are a special case in that they are not considered priority debts, but they also are difficult to discharge. 

Dischargeable Debts in Chapter 7 Bankruptcy 

When it comes to discharging debts in a Chapter 7 filing, there are several types of debt that can be eliminated. Credit card debt is one of the most common types of unsecured debt and can be discharged in a Chapter 7 bankruptcy filing. Medical bills are typically unsecured debt and can typically be discharged in a Chapter 7 bankruptcy filing. Personal loans are typically unsecured debt and can typically be discharged in a Chapter 7 bankruptcy filing. Private student loans are typically unsecured debt and can typically be discharged in a Chapter 7 bankruptcy filing. However, federal student loans are non-dischargeable in most cases.  There is often more to think about regarding secured debt, secured debt can also be discharged in Chapter 7 bankruptcy. 

Benefits of Discharging Debts in a Chapter 7 Bankruptcy 

There are various benefits to discharging debts in a Chapter 7 bankruptcy filing. Once your debts have been discharged in a Chapter 7 filing, you no longer have to worry about being harassed by debt collectors for payment. After your debts have been discharged in a Chapter 7 filing, you may see your credit score improve over time as the negative items associated with your discharged debts are removed from your credit report. Discharging your debts through a Chapter 7 filing also gives you the opportunity to start fresh financially and rebuild your credit over time. 

Conclusion 

In most cases, credit card debt, medical bills, personal loans, and private student loans can be discharged in a Chapter 7 bankruptcy filing. Discharging debts through a Chapter 7 filing provides relief from debt collectors, can improve credit score over time, and allows individuals to make a fresh financial start. Individuals should consult an experienced bankruptcy attorney for more information on the process and potential risks associated with filing for Chapter 7 bankruptcy. Filing for Chapter 7 bankruptcy can be an intimidating process, but it can be an effective tool for those who are overwhelmed with debt and need relief from creditors.