Typically, filing Chapter 7 bankruptcy will discharge just about all unsecured debts. This list includes credit cards, personal loans, payday loans, and medical bills. A Chapter 7 bankruptcy will not discharge any secured debts, like those related to an automobile or a house. These loans are secured by the property, and if the individual wants to keep them, they will have to pay for them.
There is another list of obligations that will not be discharged when filing bankruptcy. This list includes any kind of restitution ordered by the court, like fines, repayment of damage to property, or reparations. The same applies to spousal maintenance and child support. This is set up by the court and filing bankruptcy will not wipe it out. Likewise, the only taxes that can be included in a bankruptcy filing are those that are over three years old, and the individual must be current in their tax filings. So, any taxes that are either current or less than three years old cannot be discharged in bankruptcy filing.
A Chapter 13 not only wipes out the same debt as a Chapter 7, but can potentially (based upon individual circumstances) wipe out second mortgages on real estate in their entirety, lower car payments, and eliminate debtor’s responsibility for other types of debt not dischargeable in a Chapter 7. In certain circumstances, people with a suspended driver’s license may even discharge insurance surcharges and have their license reinstated immediately upon filing the bankruptcy.
Can Student Loans Be Discharged When Filing Bankruptcy?
One type of debt that usually cannot be discharged when filing bankruptcy is the student loan. Student loans typically survive any bankruptcy discharge and will last an individual their entire life. The only way an individual filing bankruptcy can include them in their bankruptcy discharge is to file a motion with the bankruptcy court and show cause of why the debt should be included. This will be a job for a bankruptcy attorney, as it can be complicated. The bankruptcy court will require the individual to prove that they will never have the ability or means to pay these debts back. Usually, the only way a bankruptcy judge would agree with this is for medical reasons. If a person got in a catastrophic accident and became paralyzed and was unable to work, this possibly would be a reason that the bankruptcy judge would approve it. It is totally up to the discretion of the bankruptcy court as to which student loans are dischargeable and which are not.