What kinds of debt problems are solved in bankruptcy?

Categories: FAQs

Bankruptcy is a proceeding to resolve and reconcile debts and assets, but the reality of bankruptcy is that it is used to eliminate certain debts, pay off other debts, and put on hold some other kinds of debts.
 
What kinds of debts are eliminated in bankruptcy?
 
Most unsecured debts are eliminated in bankruptcy. What is an unsecured debt? An unsecured debt is a debt that if not paid will not result in the loss of property, other than perhaps money through collections. Some of the common unsecured debts eliminated in bankruptcy are:
 
– Credit cards debts
– Medical bills
– Most debt collector accounts
– Most court judgments if you own no land or real estate
– Past due utilities
– Pay day loan
– Loans among friends and family
– Past or delinquent rent or lease payments
– Balances owed on car repossessions
– Most past due attorney fees
– Unpaid vendors
– Payments to landlords due after moveout for repairs
– There are many more
 
What kinds of debts are paid in bankruptcy?
 
You can use bankruptcy as a tool to pay certain debts, either in Chapter 13 or Chapter 7, although Chapter 13 is typically used to pay debts on a monthly basis, almost like a forced debt consolidation loan. Some common things paid in bankruptcy are:
 
– Recent or priority taxes
– Spousal or child support arrearages
– Mortgage arrearages
– Property taxes
– Secured debt payments of cars and vehicles
– Title loans
– Loans for things like furniture
– Short term past due apartment rental arrearages
– Secured judgments
– There are many more
 
What kinds of debts are held off in bankruptcy?
 
There are some debts that do not typically get eliminated in bankruptcy. But they are subject to the prohibition from collection during the bankruptcy. So in some cases, even though some of your debts may remain, the rest are eliminated, and while your case goes through the bankruptcy process, the creditors cannot bother you for collections until much later. Some of these debts are:
 
– Non priority, non dischargeable tax obligations
– Student loans
– Debts obtained fraudulently
– Martial debts not in the nature of alimony or support in Chapter 7 cases
– Certain debts incurred just before filing bankruptcy
– Debts from liability incurred intentional activity
– Certain homeowner’s association fees