Hamilton & Antonsen
Types of Debt you Can and Cannot Eliminate in Bankruptcy
For people who are facing substantial debt, filing for bankruptcy in will County can be a powerful tool in rebuilding credit. Bankruptcy can stop collection efforts, including most lawsuits and wage garnishments. The scope of bankruptcy also extends to many types of debts, which often includes amounts like credit card balances and medical bills.
Bankruptcy, however, does not stop all creditors and does not wipe out all financial obligations. For example, bankruptcy rarely stops child support or student loans. This article reviews some additional information about what debts bankruptcy can (and cannot) eliminate.
Debts Illinois Bankruptcy Can Eliminate
Bankruptcy offers individuals the opportunity to eliminate certain types of debt. The two primary types of bankruptcy, Chapter 7 and Chapter 13, offer individuals different benefits. As a result, a person must select the bankruptcy chapter that works best for him or her. Consider how the following debts are eliminated:
Credit card and other nonpriority unsecured debts.
Bankruptcy is an effective method of eliminating credit card and other types of unsecured debt. This debt is referred to as unsecured because the debt is not generally linked to collateral (other property you own) therefore people do not promise to give the property back if they fail to pay their bills. For individuals who file Chapter 7 bankruptcy in Joliet, it often takes three to four months to discharge a debt. People who file Chapter 13 bankruptcy will likely be required to pay back some amount of unsecured debt in accordance with a three to five-year repayment plan.
For people who cannot afford the payments on property obtained with a secured debt, Chapter 7 and Chapter 13 bankruptcy can often discharge these debts, but debtors would generally need to surrender property tied to those debts (but not always(. Often, however, a person will not be able to retain ownership of the property. Some of the most common types of secured debts include houses, cars, and other high-value assets like computers.
Debts That Bankruptcy Cannot Eliminate
Bankruptcy cannot eliminate all types of debt. Some of the most common types of debt that bankruptcy cannot eliminate include:
Child support and alimony obligations.
These debts almost always survive bankruptcy in full.
Except for limited circumstances, student loans generally cannot be discharged in bankruptcy. To discharge student loans, a person must establish that repayment of the loans would result in an “undue hardship,” which can be difficult to establish.
Eliminating tax debts in bankruptcy is not easy to do. In some cases, however, it is possible to discharge older unpaid tax debts.
Other types of non-dischargeable debts.
Besides the previously mentioned categories, other types of debts are not dischargeable under Chapter 7 or Chapter 13 bankruptcy include certain debts that a person forgets to list in bankruptcy filings (not all), debts related to personal injury cases in some cases, and fines owed to government entities, and penalties imposed by criminal restitution or traffic tickets.
In the cases of each of these debts, the amount will likely remain when a person’s Chapter 7 bankruptcy case concludes. If a person files for Chapter 13 bankruptcy in Joliet or Will County, Illinois, an individual will often be required to repay these debts in full through the terms of a repayment plan.