In general, all people who find themselves in a situation where they are overwhelmed by debts and they want a fresh start should know what bankruptcy offers.
Basically, some debts can and some of them can not be avoided. Not all debts can be discharged, and some are generally very difficult to get discharged.
Can credit card debt be discharged?
The most common question that people have regarding bankruptcy is whether their credit card debt will be avoided. The answer actually depends on which chapter a person files under.
This means that for instance chapter 7 will allow you to avoid all credit card debt immediately. On the other hand, chapter 13 will reorganize your debts including this one.
In that way, at least some part of your debts will be repaired as time pass. When you manage to repair the portion of your debts that the court requires based on your income and expenses, the remainder will be discharged and avoided.
Additionally, some other debts can be also discharged and avoided in filing chapter 7 such as medical debt, personal loans, and even promissory notes. The thing that you should know is that certain debts can be avoided only through chapter 13 filing.
As we said, in this case the debts are reorganized which means that you will pay them partially. Some of these debts include court fees, HOA fees, co-op fees, condo, loans from retirement, debt from non-dischargeable tax debts, etc.
What debts can’t be avoided?
In general, not all debts are treated the same which means that some of them can and some of them can not be avoided by bankruptcy. The court takes some types of debts very seriously and these debts can not be wiped out just by filing for bankruptcy. In this category are the following debts:
- Alimony
- Child Support
- Debts that were not listed in the bankruptcy
- Student loans – undue hardship exception
- Criminal fines/penalties (All court fees and court-ordered judgments related to any criminal activity cannot be discharged)
- Debts due to injury or death caused by driving under the influence (any judgments or debts incurred as a result of personal injury or death to others caused by your own negligence or criminal activity.)
- Income tax debt
- General tax debt
In general, there are three categories for debts that can not be avoided and discharged through bankruptcy. Those debt categories are named as those that are never discharged, those that can not be discharged due to some creditor successfully objects, and the last one include those that may be discharged because of some legal exception.
For the last one, you will be needing a lawyer with a strong argument for you and your case. If you want more information about bankruptcy lawyers and how they can help you with your case you may visit https://www.kanialaw.com/
Below we listed all possible debts that can not be avoided, and now we will categorize them.
The first category includes child support and alimony debts, some tax types, fines or penalties for breaking the law from government measures, and personal injury debts. The second category includes debts from fraud, some debts for purchasing the items within 90 days of filling, larceny, breach of fiduciary duty debts, and any other debts left off the petition.
In the last category, you can find student loan debts. These cases are very difficult to discharge through bankruptcy, and they are requiring demonstration under hardship. The hardship is measured court by court through various examinations. This last category also includes income taxes.
These taxes additionally include other legal requirements and the passage for some time. As we already mentioned, for this category you are required to make a compelling case to the judge. For this reason, it is recommendable to have a competent and experienced bankruptcy lawyer on your side that will have you prove your case. If you find yourself in this situation and you need legal advice from an expert, you can consult with Scura Law.
How bankruptcy will affect your credit score?
Basically, you have the bankruptcy option as the last one for debts that you can consider. It is true that debts can devasting effect on your credit score. You will lose all your credit scores.
The bankruptcy can stay on your credit report for even ten years for a chapter 7 filling and seven years for a chapter 13. Therefore, your credit score will be recovered before those years pass.
However, the notation on the credit file will be there for lenders, landlords, insurance agents, and employees and they can see this document. As you can assume you will have trouble qualifying for new loans at good rates. You can lose a new place to live and you can see that your insurance rates are higher. Additionally, you will lose out on a promotion at work or to get a new job.
What are bankruptcy alternatives?
Bankruptcy is more than just leaving some debts and creditors. It can affect a lot on your personal and financial situation. That is why you should consider bankruptcy only after you try some other alternatives. We will mention some of them below.
You should evaluate your budget
Before everything, you should explore your potential alternatives. One of the crucial things that you can do is to examine your spending and get a clear picture of things that you can cut off.
For instance, you can consider even finding a second part-time job for additional income or to sell some things that you do not use anymore. Find ways to use some new funds to put toward the debts you have.
Logically, when you are looking at your spending, you should be sure that your income will be enough for getting rid of your debts. Take some time and think clever. Do not get overwhelmed because of your debts because there is always some way to manage them.
Additionally, you can consult with a credit counselor and ask for some advice. Since they are experienced in that field, they will find a way to help you achieve your goal and through alternative way avoid bankruptcy.
