What Debt Follows You After Bankruptcies?

Individuals commonly pursue Chapter 7 and Chapter 13 bankruptcy, which are among the various types of bankruptcy available. Despite the type of bankruptcy chosen, it is important to note that not all debt can be eliminated through the bankruptcy process.

Bankruptcy does not allow for the discharge of certain types of debts, such as taxes, spousal support, child support, alimony, and government-funded or backed student loans. However, filing for bankruptcy can give you the room to get back to financial security. While not all debts will be erased, several types of debts will be discharged, which could account for a significant amount of the filer’s debt.

Call our bankruptcy attorneys at Young, Marr, Mallis & Deane at (609) 755-3115 for a free case review today.

Which Debts Cannot Be Discharged By Filing for Bankruptcy?

Unfortunately, not all debts can be eliminated through bankruptcy proceedings. The specific debts that fall under this category and the reasons for their exclusion might differ depending on the type of bankruptcy being pursued. Often, these debts are deemed ineligible for discharge due to public policy considerations. However, determining which debts will follow in each case depends on a close evaluation of the facts. Fortunately, our Philadelphia bankruptcy attorneys can help you understand which debts will be discharged through a bankruptcy filing and which will remain. The following are debts that usually follow you after filing for bankruptcy:

Tax Debt

Certain types of taxes are not able to be eliminated through bankruptcy, but there are some exceptions to this rule. It is possible to discharge tax debt that meets certain qualifications. In Chapter 7 cases, federal or state income taxes might be wiped out if they are associated with a return that was due at least three years before the bankruptcy case. This three-year timeline includes any extensions that might have been granted by the state or federal government for tax payment. Non-income tax debts, such as property taxes and tax liens that are attached to your property cannot be eliminated through a bankruptcy filing.

Child and Spousal Support/Alimony

In many bankruptcy cases, any money owed for spousal or child support, as well as alimony, cannot be discharged. This means that these legal obligations cannot be eliminated through the bankruptcy process. Therefore, after your bankruptcy case is completed, any remaining balance you owe for these types of obligations will still be required to be paid.

Student Loans

It is rare for student loans to be discharged, regardless of whether they were obtained from the government, private lenders, or a university. There are only a few exceptions to this rule, such as if the borrower can no longer work due to a disability and can provide evidence of this. Another exception would be if the borrower is facing undue hardship and can prove that they have made every effort to repay the loan.

However, qualifying for a discharge based on these exceptions is a challenging process. The borrower must demonstrate that repaying the loan would prevent them from maintaining a basic standard of living. Other debts that are typically not eligible for discharge through bankruptcy include fines or penalties imposed by government agencies, as well as personal injury debts arising from driving under the influence. Debts resulting from fraud, embezzlement, larceny, or breach of fiduciary duty, as well as any debts or creditors that were not included in the bankruptcy petition, are also unlikely to be discharged.

Which Debts Can Be Discharged By Filing for Bankruptcy?

The primary objective of filing for bankruptcy is to eliminate as much debt as possible and begin anew financially. During this process, various types of debts will be discharged either immediately or at the end of the bankruptcy process. Once the debts are discharged, you will no longer be obliged to pay them. This is a permanent order, and creditors are not allowed to pursue collection.

Credit Card Debt

In the event that you opt for Chapter 7 bankruptcy, your credit card debt will typically be discharged immediately. On the other hand, Chapter 13 bankruptcy is designed to restructure your debts, which might entail integrating your credit card debt into a repayment plan. Once all the obligations within the plan have been fulfilled, any remaining debt can then be discharged based on your individual financial circumstances.

Medical Debt

If you are facing overwhelming medical debt, you might be wondering if bankruptcy is an option for you. The good news is that medical debt, which is an unsecured debt, can be discharged under Chapter 7 bankruptcy. This means that the debt is not backed by any collateral, making it easier for you to get rid of it.

However, if you choose to file for Chapter 13 bankruptcy, only a portion of your medical debt might be included in your repayment plan, just like with credit card debts. In this case, you will need to complete the repayment portion of your bankruptcy case before any remaining debts, including medical bankruptcy, can be discharged.

Keep in mind that bankruptcy should always be considered a last resort, and you should consult with a qualified attorney to determine if it is the right option for you. But if you are struggling with medical debt, know that there are options available to help you regain control of your finances.

Personal Loans

It is possible to eliminate or discharge unsecured personal loans through the process of filing for bankruptcy. Unsecured loans are loans that are not secured by your personal property. Furthermore, loans received from friends, family, or employers that are considered to be personal loans are also eligible for discharge through bankruptcy.

In addition to unsecured personal loans, there are other types of debt that might be discharged through bankruptcy. For instance, condominium fees, cooperative fees, or Homeowner Association fees can be discharged through Chapter 13. Similarly, loans taken out from retirement plans can also be discharged under Chapter 13.

Should I File for Bankruptcy If All My Debts Are Not Discharged

Declaring bankruptcy can have significant and lasting consequences. Your credit score might plummet by as much as 100, 150, or 200 points, and the bankruptcy will remain on your credit report for ten years in the case of a Chapter 7 filing and seven years for a Chapter 13 filing.

Despite this, filing for bankruptcy can still be advantageous in certain circumstances, even though it might not discharge all of your debts. The primary goal of bankruptcy is to provide filers with a fresh start in their financial lives. Depending on which type of bankruptcy you choose, a payment plan might be established to address many of your outstanding debts, or non-exempt assets might be liquidated to pay off what you owe, which can help you regain control of your finances.

Our Bankruptcy Attorneys Can Help

For a free case review, contact our Pennsylvania bankruptcy lawyers at Young, Marr, Mallis & Deane today at (609) 755-3115.