The Goal of Chapter 7
and Chapter 13 Bankruptcy: Debt Discharge
A
bankruptcy discharge is a court order that declares an individual’s debt has
been cancelled. As a result, creditors cannot collect on debts or send
correspondence requesting payment. The standard kinds of debts that are erased with
a discharge include:
- Credit Card Debt
- Medical Bills
- Lawsuit Judgments
- Personal Loans
- Obligations under a Lease or Contract
- Unsecured Debts
The Drawbacks of a
Bankruptcy Discharge
The
cancelling of debt can be liberating. However, a bankruptcy discharge doesn’t
magically erase all of a person’s debts. First of all, the debtor must prove to
the courts that a discharge is necessary as part of declaring bankruptcy.
Working with an attorney from a law firm can help a debtor build a case, but there is
no guarantee of the desired result.
Another
limitation of the bankruptcy discharge is that certain debts or financial
obligations can never be erased and must be paid instead. The restrictions vary
whether a debtor has filed for Chapter 7 or Chapter 13 bankruptcy. They might
include:
- Child Support or Alimony
- Fines and Penalties Resulting from Criminal Activity
- Court Costs
- Debts That Weren’t Listed in the Bankruptcy Petition
- Certain Taxes, including Property and Business Taxes
A
bankruptcy discharge can also adversely affect your credit score, which will
affect your ability to apply for loans, mortgages, or credit cards. When filing for bankruptcy, it is crucial to
consult with an attorney from a trusted law firm to formulate an effective debt
relief strategy.
