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Does bankruptcy discharge all of my debts?

Many people have the misconception that bankruptcy will discharge all of their debts. First, there are two types of bankruptcy you could file, Chapter 7 or Chapter 13. In Chapter 7, the court could theoretically order all of your debts discharged. In Chapter 13, you reorganize them into a new payment plan that takes three to five years. What remains after that could be dischargeable.

All that said, whether debts are dischargeable or not largely comes down to what type of debts they are.

What you cannot discharge

With a few exceptions, debts such as student loan debt, child support payments and tax debts are not dischargeable. Your attorney can help clarify whether any exceptions may apply, and if so, how to take advantage of them. For instance, the court may discharge student loan debt if you can show undue hardship or if the school you attended was ineligible for loans.

In addition, you may choose to reaffirm some debts. For example, perhaps you want to keep your car, and you are willing to stay under the current terms of your car loan agreement. You would reaffirm that debt, and it could not be discharged in bankruptcy.

What is dischargeable

However, you can discharge debts such as credit card bills and medical bills. If you file for Chapter 7 bankruptcy and all of your debts are unsecured loans, then yes, bankruptcy could get rid of your debt in one nice big swoop.

If you file for Chapter 13, the reorganization of your debt payments makes them more affordable. Anything unsecured that remains after the window of time runs out will probably go away.

Debts that you do not include

There are also debts that may never have come to the bankruptcy court's attention. Perhaps you have been paying on a loan from your cousin on and off for the past seven years. Your cousin may still expect you to pay on it, and for the sake of family harmony or another reason, you may still want to keep paying it when you can. These types of loans sometimes do not show up on bankruptcy filings, but people should include them in many cases. Consider including them even if you never formalized them with contracts or promissory notes.

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