If you know what bankruptcy is, then it's time to understand if it will work for you. One of the most important parts of bankruptcy is the discharge, where you are forgiven for some if not all your debts. Now, some debts you can eliminate, some you can only eliminate portions of, and still others you simply cannot discharge at all. It depends on what form of bankruptcy you file. This intro to bankruptcy guide will explain how both forms pf personal bankruptcy work, the differences involved in discharges, what debts you can eliminate, and those debts you have to pay and cannot discharge.
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How Chapter 7 Works
Chapter 7 bankruptcy is called many things: a "fresh start," a liquidation, even a second chance. It eliminates the majority of your debt, with the chance some of your assets may be liquidated in order to pay of debtors. Rarely do filers lose anything, but there is a chance some assets will be taken and sold. If your problem is a lot of debt which you have no means of paying, Chapter 7 is smart.
What You Can Discharge
The big three debts for filing Chapter 7 include medical, credit card, and mortgage debt. For example, you or a loved one may suffer an illness and are forced to go to the hospital; you are then charged $20,000 for a few weeks stay because you have no insurance. In this example, Chapter 7 could discharge your debt. Most believe this form is commonly used for credit card debt, which is true, but medical debt is the most common reason for filing bankruptcy.
How Chapter 13 Works
Chapter 13 is a repayment plan, buying you time to pay off debts. Where Chapter 7 takes months, Chapter 13 takes years. With new bankruptcy code, many are not eligible for Chapter 7 and forced to file Chapter 13. While you do pay the debts, your home, car, and other assets are better protected.
What You Can Discharge in Chapter 13
Technically, while it's called a "discharge," Chapter 13 is more about buying you time to catch up on bills. You are expected to have a regular income coming in. So many of the same debts you can eliminate in Chapter 7 you might pay in Chapter 13.
What You Must Pay
Unfortunately, some try to get out of alimony, child support, and taxes by filing for Chapter 7 bankruptcy. You must pay these debts. In some instances, you can repay the money as part of your Chapter 13 plan, making that a better option. However, child support and alimony is never discharged in any form of bankruptcy. It must be paid. There are many other debts you must pay too, including debts from student loans or lawsuits against you.
How to Get Bankruptcy Help
There are quite a few debts you can discharge, and just as many that you cannot. As bankruptcy code changes from year to year, your best option is to hire and consult with a professional lawyer. He or she is your expert when it comes to a bankruptcy discharge.
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