Most people would rather not go through bankruptcy; however, after creditors make life miserable, the day may come when bankruptcy sounds like a good option.
Many people file for bankruptcy. For example, credit card debt and medical bills can add up quickly until they are impossible to pay back. Debt discharge applies to those who register for Chapter 7 or Chapter 13 bankruptcies.
Bankruptcy can allow a fresh start
There need not be shame in filing for bankruptcy. The goal is for a person to get their debts discharged or, in other words, forgiven so they can reclaim a productive life.
When a court discharges debts, the petitioner for relief is financially off the hook in most cases. The court has wiped out the obligations. Creditors can no longer attempt to collect the debt; if they try, they are guilty of illegal behavior.
Debts dischargeable by law
The United States Bankruptcy Code states the law regarding debt discharge. Many debts fall into the dischargeable category, such as:
- Unsecured debts
- Veterans assistance loans and social security overpayments
- Medical bills
- Past due rent
- Personal loans owed to private citizens
- Utility bills
- Business debt
- Credit card debt
- Consumer debt
Debts non-dischargeable by law
Some debts are not dischargeable; for example, bankruptcy cannot erase such debts as:
- Child support or alimony
- Intoxicated or impaired driving injury fines
- Student loans
- Court costs
- Regular income taxes
- Fraud-related debts
- Penalties and fines for criminal convictions
- Certain non-income tax debts
In many court actions, an expert who understands bankruptcy law is essential for the petitioner to emerge with as little damage as possible. Other dischargeable debts can revert to non-dischargeable status if a creditor successfully challenges the legitimacy of forgiving a particular debt. These situations can require legal knowledge and experience to overcome; that is why a person filing for bankruptcy may not want to face the process alone without a savvy legal advocate on his or her side.