Wanting to get back on financial track after accumulating a significant amount of debt is commendable and achievable. Of course, before you jump into any debt relief option, it would benefit you to learn how certain avenues could help you. In particular, you may have an interest in bankruptcy after learning that the process could result in creditors forgiving your debt.
First, while you may be on the right track, the notion you hold is not entirely correct. Filing for bankruptcy does not automatically mean that you will no longer hold responsibility for your debts. However, part of the process known as bankruptcy discharge could help you reach the goal you desire.
Can bankruptcy discharge all debt?
While bankruptcy can certainly help your financial situation if it proves successful, you may want to remember that it cannot discharge all debts. Depending on whether you qualify and file for Chapter 7 or Chapter 13 bankruptcy, you may not have the following debts discharged:
- Child support
- Court costs
- Unlisted debts
- Certain tax-related debt
- Certain fines or penalties
- Debts not discharged in a previous bankruptcy
Keep in mind that this list does not represent every type of debt that bankruptcy may not discharge. Fortunately, bankruptcy can work to discharge a number of unsecured debts, including:
- Personal loans
- Medical bills
- Lawsuit judgments
- Obligations under a lease
- Credit card debt
Again, this list is not all inclusive of the debts you could have forgiven through bankruptcy.
When does discharge occur?
In order for you to reach a point where bankruptcy discharge can take place, you must follow all the necessary steps in accordance with your bankruptcy filing. Generally, with Chapter 13, you utilize an approved repayment plan to pay back creditors, and the court discharges whatever allowable debt remains after you complete your plan. With Chapter 7, you liquidate your nonexempt assets in order to repay creditors, and whatever allowable debts remain after the distribution has taken place will be discharged.
Does discharge still seem appealing?
If you feel that working toward a discharge of your debt could work in your best interests, you may want to learn more information about Chapter 7 and Chapter 13 bankruptcy. Speaking with an attorney could allow you to determine which process may best suit your circumstances and also allow you to gain reliable information on various aspects of the proceedings.