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Which debts can I discharge with Chapter 7 bankruptcy?

On Behalf of | Oct 29, 2021 | Bankruptcy

Having many debts can be overwhelming. However, you can get rid of the financial pressure by filing for Chapter 7 bankruptcy. If you file for bankruptcy under this chapter, most of your debts will be eliminated, and the creditors won’t be able to pursue you for your debts anymore. Nonetheless, you must know that not all of your debts will go away with bankruptcy, and some of them you’d still have to pay.

Chapter 7 bankruptcy debt discharge

Under Chapter 7 bankruptcy, a trustee will recover some of your assets and sell them to repay some of your debt. This doesn’t necessarily mean that you have to sell everything you own. For example, you can keep your house or car if you file for bankruptcy and the equity of the property in question is below New York’s exemption limits.

The trustee will pay as many creditors as they can from the sale of your assets. When there is no longer anything to sell, the rest of your debts will disappear. Most unsecured debts are eligible for discharge under Chapter 7 bankruptcy, such as:

  • Medical bills
  • Utility bills
  • Rent bills
  • Credit card charges

Unfortunately, Chapter 7 bankruptcy may not get rid of your secured debts (debts backed by collateral). This means that the creditors could still seize your property if you don’t pay, even if its equity is exempt by the law. For example, the creditors could take your house if you are behind on mortgage payments.

Ineligible debts

Not all unsecured debts are eligible for discharge either. Some of the unsecured debts that you cannot eliminate with bankruptcy are:

  • Alimony and child support
  • Certain tax debts
  • Student loans
  • Educational debts
  • Personal loans
  • Debts owed in a personal injury lawsuit

In some situations, the court can discharge student debts if the debtor proves that paying the debt would cause them extreme hardship.

Living debt-free

Filing for bankruptcy may seem risky, but it is a solution to get rid of most of your unsecured debts. You must keep in mind that not all of your debts will disappear with bankruptcy, and some of them you’ll still need to pay. Nonetheless, getting some of them eliminated would be a relief that will let you start anew.  You don’t deserve to live under stress, and you may get rid of your financial struggles if you take the right steps.