Bankruptcy Can Clear Most But Not All Loans and Debts

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Bankruptcy is an option when you find yourself drowning in a sea of debt but  talk to an experienced bankruptcy attorney about how it will affect your future because there are certain kinds of debt that can be discharged and other kinds that cannot. 

In bankruptcy many debts are dischargeable (forgiven) but some debts are non-dischargeable (still follow you). In general, debts that are most often dischargeable include: utility bills, vehicle loans, vehicle leases, rent that hasn’t been paid, debt in collections, medical bills, some tax debt, any outstanding judgments, payday loans, and most unsecured loans like credit cards. However not all charge cards and not all debts are dischargeable. Examples of the kind of credit card debt that will not be discharged when filing a Chapter 7 bankruptcy are: when you charge a vacation to your credit card and a month later file for bankruptcy, or charge large-ticket items that you couldn’t possibly afford to pay back, go on shopping sprees that aren’t consistent with your spending prior to the spree, or any spending you do that may appear fraudulent.  Also even if a bill is dischargeable careful case preparation is important because creditors who are left out may try to follow you.

Debts that are non-dischargeable when filing Chapter 7 also include: student loans, child support, alimony, some taxes, judgments involving accidents you caused while you were intoxicated, government fines and penalties, and some taxes; plus any debts accumulated through larceny, embezzlement or while you were managing the assets for another person; plus: association fees, condominium fees; plus damages for injury to another that was willful or malicious, or damage based on conduct that was false or fraudulent.

Also, liens securing property are usually not released in Chapter 7 bankruptcy which often makes reaffirmation necessary. However, liens can be released under Chapter 13, making proper counseling as to which chapter of bankruptcy to file important.

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