This article will teach you:
- How a Chapter 7 bankruptcy can help you pay off your debts
- what you’ll be erasing in Chapter 7, and
- In bankruptcy filing, how do you classify debt?
- Find out what bankruptcy can and cannot accomplish for you.
How Does a Discharge Work?
Individual debtors are released from personal accountability for debts discharged by bankruptcy, and creditors due that debt are barred from conducting collection activities against the debtor. To put it another way, the debtor is no longer obligated to pay any discharged debts. About four months after filing the bankruptcy petition, the majority of Chapter 7 filers receive an automatic discharge.
Which Debts Can Be Forgiven?
A list of routinely dismissed debts is shown below.
- Charges on a credit card (including overdue and late fees)
- Accounts of collection agencies
- Medical expenses
- Personal loans from family, friends, and coworkers
- Bills for utilities (past due amounts only)
- Checks that have been forged (unless based on fraud)
- Loans for students (only in the rare circumstance that you can prove undue hardship)
- Deficiency balances from repossessions
- Insurance claims for automobile accidents (except those involving drunk driving)
- Debts owed by businesses
- Money owing to a landlord under a lease arrangement (includes past due rent)
- Judgements of civil courts (unless based on fraud)
- Penalties and unpaid taxes that have accumulated over a period of time
- Lawyer’s fees (except child support and alimony awards)
- Accounts with a revolving balance (except extended payment charges)
- Overpayments of social security, and
- overpayments on veterans’ assistance loans
A word regarding utility deposits and fraud. An otherwise dischargeable obligation can become non-dischargeable due to debt-related misconduct or fraud. A utility company cannot refuse to supply service due to a bankruptcy filing, but it can levy a reasonable deposit to secure future payment.
Dischargeable Debt Timing
It’s not only about the type of debt you have. When you get into debt, the obligation comes into play as well. This is how it goes.
Debt that hasn’t been filed yet. A pre-petition debt is one that you have accrued prior to filing for bankruptcy. The bankruptcy court will dismiss all qualifying pre-petition debt, such as credit card bills, personal loans, and medical debt, at the conclusion of your case.
Debt incurred after the filing of the tax return. Post-petition debt refers to the bills you accrue after filing your original bankruptcy case. You are still responsible for any outstanding balances beyond the original filing date. As a result, even if your lawsuit isn’t finished, you can go into fresh debt.
In other words, only debts incurred prior to the filing date of Chapter 7 are forgiven. Any debt you incur after filing your petition but before securing a discharge is your responsibility.
Prioritization vs. Nonprioritization Debt that isn’t secured
You must organize your debt into categories before filing for bankruptcy. If funds are available, the trustee will pay some creditors before others, depending on whether the claim is secured, priority unsecured, or nonpriority unsecured. Higher-ranking claims are paid first, followed by lower-ranking debt.
For example, “priority” debt is given special consideration and is paid first. Common examples are child support payments and tax debt. After a Chapter 7 bankruptcy, you’ll be responsible for a variety of priority debts.
Bills that you can discharge are usually classified as “nonpriority unsecured” debt. (Unsecured debt isn’t backed up by anything.) Secured debt, on the other hand, includes things like a home mortgage or a car loan.) However, a few non-priority unsecured obligations are not forgiven. For example, you won’t be able to discharge student loan debts in bankruptcy unless you file a separate lawsuit and demonstrate that you meet certain criteria.
The majority of liens will remain on the property.
Despite the fact that a debtor is no longer personally liable for discharged obligations, any legitimate lien that has not been avoided (rendered unenforceable) will remain in the bankruptcy case. For example, if you don’t sign a reaffirmation agreement to continue paying your car payment, the discharge will cancel your duty to pay the car loan; nevertheless, you won’t be able to keep the automobile. The lender will seize the vehicle using its lien rights.
After you’ve filed for bankruptcy, you can no longer receive collection calls.
If a creditor calls you after you file bankruptcy, giving them your case number and filing date will almost certainly put an end to the calls. It’s simple to find your filing date. Take a look at any bankruptcy documents that have been filed with the court. (Even if you hire a lawyer, you’ll get copies of all notices.) Next to your case number, the filing date will display at the top of the page.
A creditor can use the information to rapidly verify your bankruptcy, and if the calls don’t cease, the creditor will face consequences.
Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale
Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.
*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.