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Understanding What Bankruptcy Really Means


How Chapter 7 Treats Your Debts

Many people turn to Chapter 7 bankruptcy for debt relief as it provides a fast solution for debt problems. While this branch can help with some debts, it does not typically discharge all of the debts a person owes. Here is a breakdown of how Chapter 7 treats most debts, which is helpful to know if you are considering using this branch of bankruptcy.

It Discharges Some Debts

People that use Chapter 7 bankruptcy often owe a lot of money to creditors for unsecured debts. Unsecured debt is an obligation that does not have collateral. The best example is a credit card bill. If you owe credit card companies, these debts will almost always result in a discharge through Chapter 7. There are exclusions, but most people receive total debt forgiveness on credit card bills. Medical bills also fall into this category. Many people file Chapter 7 if they owe thousands of dollars to healthcare providers. These debts also generally receive a total discharge. You can also receive a discharge on other debts, such as personal loans.

It Does Not Discharge Others

Chapter 7 does not provide a discharge for other debts, though. For example, if you owe money for child support, you cannot receive forgiveness of this debt. Chapter 7 does not discharge priority debts, such as child support or alimony. You will also not receive a discharge on your mortgage debt if you plan on keeping your house. The same is true for a car that you owe money on when filing.

Some Debts Might Qualify in Certain Cases

You might also want to know about some debts that might qualify for a discharge. IRS tax debt is an example of a debt that sometimes qualifies for a discharge. In most cases, though, it does not. For you to receive a discharge on IRS tax debt, you must meet specific guidelines. Another example of a debt that sometimes qualifies for a discharge is student loan debt. Again, this debt does not typically qualify for debt forgiveness in Chapter 7 cases, but there are times when it might.

Now that you understand these basic principles of Chapter 7, you can review your debts to see what categories you have. If you feel that Chapter 7 would help you when filing for bankruptcy, schedule a consultation visit with a local bankruptcy lawyer. A bankruptcy lawyer can provide you with additional information. 

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Understanding What Bankruptcy Really Means

When you begin making strides towards a healthier, more financially sound future, there are a lot of things that you can do to simplify the process for yourself. While paying down debt and working towards a simpler lifestyle can make a big difference, sometimes a bankruptcy is required to make things better. Bankruptcy will essentially clear the slate for you and your family, making it possible to move forward without worrying about heavy bills hanging over your head. On this helpful website, check out great tips and tricks that could make it possible to prevent problems in the long run, so that you can make things better.

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