The bankruptcy discharge is the ultimate goal of most bankruptcy cases. It is a court order that releases the debtor from the obligation to repay certain debts. Bankruptcy law divides debts into four categories: secured debt, priority debt, student loans, and general unsecured debt. Each of these categories is treated differently in bankruptcy.
Secured debt usually includes mortgages and car loans. In a Chapter 7 bankruptcy case, you have the option to either keep the secured property and continue paying the debt or surrender the property and have the debt discharged.
Priority debt includes government fines and penalties, recent taxes, and domestic support arrears. This type of debt is not dischargeable in a bankruptcy case.
Student loans are generally not dischargeable in bankruptcy, but there are some limited exceptions. In certain circumstances, you may be able to have your student loans discharged if you can prove undue hardship, and there are some recent promising developments in this area.
General unsecured debt is the fourth category and includes credit card debt, medical bills, deficiencies on repossessed vehicles, and other similar debts. In a Chapter 7 bankruptcy case, general unsecured debt is fully dischargeable, which is why many people choose to file for Chapter 7.
It’s important to note that even if a debt falls into a category that is generally dischargeable in bankruptcy, there may be exceptions or conditions that apply. For example, debts resulting from fraudulent activity may not be dischargeable, even if they are considered general unsecured debt.
It’s advisable to consult with a qualified bankruptcy attorney to determine which of your debts may be eligible for discharge in bankruptcy and what the potential outcomes of your case may be. The bankruptcy discharge can provide a fresh start for those who are struggling with overwhelming debt, but it’s important to understand the limitations and requirements of the bankruptcy process.
If you have any questions about this post or if you’d like to speak with an experienced bankruptcy lawyer about your situation, contact Boeing Law Office for a free confidential consultation at (510) 761-6230.