If you are struggling to pay your dues and have tried all of your options, the only option you might be left with is filing for Chapter 7 Business Bankruptcy. This raises the question of what debts are discharged and which ones remain. It is important to understand the details of the process before filing.
You can wipe out various types of debts in chapter 7 bankruptcy, but there are certain debts that remain with you. It is important to know what they are and what your options are for the debts that stay with you. Consult with an attorney to know more.
Which debts are cleared in chapter 7 bankruptcy?
By filing for bankruptcy, you can get rid of a number of debts. After filing, the court breaks the contract between the bankruptcy filer and the creditor, thus freeing you from debt. You are no longer legally obligated to make the payments when the contract is no longer active.
However, the debts do not discharge completely. Even after getting rid of these stressful debts, the terms “discharged in bankruptcy” will be shown up in your credit report for up to ten years.
Here is a list of the debts that get cleared in chapter 7 bankruptcy:
- credit card charges
- medical bills
- past-due utility balances
- most civil court judgments
- business debts
- repossession deficiency balances
- government program overpayments,
- most auto accident claims
- old tax penalties and unpaid taxes
- most attorneys’ fees
- personal loans from close ones
- collection agency accounts
Which debts are non-dischargeable in Chapter 7 bankruptcy?
While filing for Chapter 7 bankruptcy can help you get rid of a number of debts, there are many types of loans that stay with you. Here is a list of the debts that stay because you will have to pay for them even after your bankruptcy case closes.
- Student loans.
A student loan is an unsecured debt. However, you will still have to pay for it unless and until you can prove that you won’t be able to pay for it in the future.
- Debts incurred by fraud.
The court won’t help discharge a debt if it is found that the filer acquired the debt by defrauding the creditor or engaging in an illegal action.
- Luxury purchases were obtained soon before filing for bankruptcy.
Before you file for bankruptcy, you should not make any big purchases. If you do, then the court understands that you made the purchases on purpose as you did not intend to pay for them anyway. You will need to prove that the purchase was necessary.