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What types of debt can bankruptcy erase?

On Behalf of | Aug 24, 2022 | Bankruptcy

Many Californians struggle with debt, whether it comes in the form of credit card bills, medical expenses, a home mortgage, student loans or some combination of these and more. Most of the time, perhaps, they manage to pay their bills every month, but it’s easy to get in over one’s head. An unpaid balance can gather interest quickly, making it nearly impossible to pay off. An unexpected setback like a medical emergency or job loss can lead to a serious financial crisis.

Personal bankruptcy under Chapter 7 of the U.S. Bankruptcy Code offers one of the fastest and most effective ways to get out of this kind of debt crisis.

If you are eligible for Chapter 7, you can expect to see most of your debts discharged after 3-5 months. However, filing for bankruptcy is a serious step, and you should carefully consider your options before you file. This includes knowing what types of debts you can and cannot discharge through Chapter 7.

First, the good news

One of the first steps you take as you file for bankruptcy is to list all of your debts and creditors. Chapter 7 can help you eliminate debt in some of its most common forms, including:

  • Credit card balances
  • Utilities and phone bills
  • Medical bills
  • Personal loans

The court may also discharge your personal liability for discharged loans, such as a car loan.

Harder to discharge

Some types of debt are much harder to discharge. Student loan debt is notoriously difficult to discharge. It’s also hard to discharge tax debts, especially if they are less than three years old.

Chapter 7 won’t let you discharge certain other types of debt, including:

  • Debts from alimony, child support or many other debts related to divorce
  • Court fines, penalties and awards in a personal injury case if you caused injury in a drunk driving accident
  • Money owed to a government agency

Learn more

Behind every Chapter 7 filing is a personal story. It’s important to seek out advice from an attorney in order to learn how personal bankruptcy law may apply to your unique set of circumstances.