When you declare Chapter 7 bankruptcy, you state that you cannot pay your current debts given your income. In many cases, this filing brings almost instantaneous relief to financially stressed consumers. When making the decision to file, it is important for each filer to know how much debt can and cannot be forgiven. Find out what debts may be forgiven with a filing and what may not be from the information below. For more information, contact a bankruptcy attorney service.
Debts That Go Away
Unless there is an issue with fraud, the below debts are usually forgiven:
- Credit card debt
- Personal or signature loans, either from a lender or from an individual
- Medical debts
- Car title loans
- Payday loans
- Old IRS debts (older than three years, in most cases)
Debts That Do Not Go Away
The debts listed below are common among many filers and knowing that they cannot be discharged might influence your decision to file.
- Child support – You must continue to meet any child support requirements. If you are behind then you remain responsible for the debt. Being behind on your support obligation could incur some serious penalties. If you are having your wages garnished due to back child support non-payment, they will remain in place even after your file bankruptcy.
- Student loan debts – Both government-backed and private lenders require repayment of a student loan debt, even with bankruptcy. That being said, you may qualify for loan forgiveness if you meet the fairly strict standards. This is known as a hardship exemption and you have to be current on your payments when you file for bankruptcy to qualify for it.
- IRS – As mentioned above, certain older IRS balances may be discharged but filers must meet the requirements. In most cases, you must prove that you have filed a recent tax return before your bankruptcy can be discharged. This is a common question asked of filers at the creditor's meeting. Newer tax debts must still be paid. Additionally, if the IRS has placed liens on your property, the liens can remain in place until the debt is paid. However, no new liens due to taxes can be put in place.
The debts that can be discharged may bring enough relief to filers so that they can better handle the remaining obligations. To find out more about this complex issue, speak to a bankruptcy lawyer at your earliest convenience.