What debts will be eliminated in bankruptcy?
Bankruptcy can be a lifeline for individuals who find themselves overwhelmed by debt. Last year, over 800,000 people filed for bankruptcy in federal courts across the country. If you are considering filing for bankruptcy, there are several factors you should consider. Our Xenia, Ohio bankruptcy attorneys at Miami Valley Bankruptcy offer a look at three things you should know if you are contemplating bankruptcy. Contact our office for an individualized assessment as to whether bankruptcy is right for you.
- You Have Options When It Comes to Filing for Bankruptcy
You can choose between filing for Chapter 7 and Chapter 13 bankruptcy. It is important that you understand the basics of each chapter so that you know what type of bankruptcy will be most beneficial for you. Chapter 7 is known as the liquidation chapter. In a Chapter 7 bankruptcy, you must meet strict income and asset requirements, but those who qualify could see most, if not all, of their debts eliminated.
In a Chapter 13 bankruptcy, the income requirements are loosened. This chapter is known as the “reorganization chapter” because it allows you to keep your assets and enter into a three to five-year repayment plan with your creditors.
- Bankruptcy Will Eliminate Most Unsecured Debts
Bankruptcy can only be used to eliminate unsecured debts and obligations. Examples of debts that will likely be eliminated in a Chapter 7 or a Chapter 13 bankruptcy include credit card debt, medical bills, lawsuit judgments, and possibly personal loans. Debts that will remain even after you declare bankruptcy include student loans, child support, alimony, taxes, and real estate liens. Your attorney will review your debts to assess whether bankruptcy will effectively result in the discharge of your debts.
- Bankruptcy Will Impact Your Credit, But Often Not How You Think
Most potential filers have the notion that filing for bankruptcy will destroy your credit. It is true that the bankruptcy will stay on your credit report for years to come, but for many people that have reached the point of bankruptcy, filing for bankruptcy will actually stop the damage to their credit. Unpaid debts will constantly take a hit on your credit. By filing for bankruptcy, you stop the debt collections process and spare your credit from further hits. Often, bankruptcy offers filers a chance to rebuild positive credit.