Discharging Debt Through Bankruptcy

Bankruptcy Lawyer for Hagerstown, Frederick and Silver Spring, MD

One of the many benefits of filing for Chapter 7 bankruptcy is the ability to discharge debts after the creditors have been repaid through the liquidation process. The cancellation of remaining debts is a welcome relief for most families, and allows them to finally achieve a fresh start and protect their financial futures.

You may also be able to discharge your debts in Chapter 13, although the process is different. This Chapter of bankruptcy uses the reorganization of your debt to create a new payment plan that will repay your creditors over a 3 to 5 year period. in many cases, the balance that remains once the repayment period is over is discharged. There are certain exceptions to discharging debts under Chapter 7 and Chapter 13, however, so if you are considering bankruptcy to pursue debt relief, it is important to understand the laws.

What debts can be discharged?

Under bankruptcy code, you are usually able to discharge your personal and unsecured debts. Unsecured debts are those that are not attached to actual property, and include such things as credit card bills, medical bills, and debt owed for services. If your debt is mainly comprised of unsecured debt, filing for bankruptcy could provide the relief for which you have been searching.

It is important to note, however, that the ability to have your debts cancelled does not mean you can go on a spending spree before filing. The court will examine your financial transactions within 90 days of your filing, and if you purchased luxury goods or services during that time or made a substantial balance transfer, the debts will be ineligible for discharge.

Understanding Non-Dischargeable Debts

The following are some of the debts that cannot be cancelled through bankruptcy:

Non-Dischargeable Debts Under Chapter 7:

• Student loans
• Child support payments
• Alimony
• Most taxes and tax liens
• Unscheduled debts
• Debts obtained through fraud or false pretenses
• Many debts for court judgments

Non-Dischargeable Debts Under Chapter 13:

• Student loans
• Child support payments
• Alimony
• Fines and restitution
• Certain taxes
• Unscheduled debts
• Debts obtained through fraud
• Debts incurred after filing your bankruptcy petition
• Interest owed on non-dischargeable debts

It is crucial that you examine your debts and determine what you hope to accomplish through bankruptcy. If your debts are mainly non-dischargeable, bankruptcy may not address your unique issues, so you should discuss your alternatives with a skilled attorney.