What Debts Can Be Discharged Through a Chapter 7 Bankruptcy Filing?

If you are struggling to pay your bills, you may be considering bankruptcy as a way to get a fresh financial start.. There are limits, however, on what debts may be discharged in a Chapter 7 or Chapter 13 filing. You want to know what debts you can and cannot rid yourself of in Chapter 7 or Chapter 13, so that you get the outcome you need and want. This blog provides an overview of the types of debts that can and cannot be discharged in a Chapter 7 or Chapter 13 bankruptcy filing.

As a general rule, you cannot discharge secured debt and still keep the property. Secured debt means home mortgages, car loans and other debts secured by collateral.

The other kinds of debt that are generally excluded from discharge are:

  • Child support and alimony obligations—These obligations can never be discharged.
  • Tax obligations—There are limited instances where a tax debt can be eliminated in a Chapter 7 bankruptcy. The tax debt must be at least three years old, the tax return must have been filed at least two years ago, any assessments by the tax authority must have been made more than 240 days ago, and you must not have committed tax evasion or tax fraud.
  • Student loan payments—In rare situations, where a debtor has shown extreme hardship, the bankruptcy court has allowed the discharge of student loan payments. As a general rule, though, they cannot be extinguished in bankruptcy.
  • Equitable Distribution from a Divorce – If you owe money to a former spouse as equitable distribution (as opposed to child support or alimony) arising from a divorce, you cannot discharge this debt in a Chapter 7. However, this kind of debt can be discharged in a Chapter 13!

Even though you may not be able to discharge all of your debts by filing for bankruptcy, filing for bankruptcy can often by a smart financial decision. By wiping out your credit card, medical bills, and personal loan debts you will free up

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.