Bankruptcy is designed to give those in financial trouble (usually those with a lot of debt) a fresh start. Filing for bankruptcy can help you wipe out a lot of debt, while other debt might not be eligible to wiped out. These two types of debt are considered dischargeable and non-dischargeable debt.
It is important to note their differences and how they are each treated in bankruptcy.
Dischargeable and Non-Dischargeable Debts Defined
Dischargeable debts are defined as obligations that can be eliminated by your bankruptcy discharge. This means you are not obligated to pay any of these debts and creditors cannot try to collect them from you. Common dischargeable debts are as follows:
- Credit card debt
- Personal loans made by friends, family, and others
- Utility bills that are past due
- Medical bills
Non-dischargeable debts are basically obligations that cannot be wiped out by your bankruptcy discharge. Common types of non-dischargeable debt are as follows:
- Student loans
- Alimony and child support obligations
- Liens on a property you cannot afford
In most bankruptcy cases, your dischargeable debts will be eliminated without any repayment. But depending on which bankruptcy you file under, your creditors may or may not receive something in your bankruptcy.
Discharges in Chapter 7 and Chapter 13 Bankruptcies
Chapter 7 bankruptcy cases are no asset, which means there is nothing for the trustee to sell to pay your creditors with. Therefore, your dischargeable debts are typically eliminated without receiving anything. If there are any proceeds to be distributed, it will be your general unsecured debts, like credit card obligations, that are last to get paid.
It is important to note that only your liability for these debts is eliminated through a discharge. If there are liens on your property, you will be required to keep making payments on that property. If you are unable to, the lender has the power to foreclose or repossess your property.
When it comes to Chapter 13 bankruptcy, your dischargeable debts are mostly considered non-priority general unsecured claims. They will not receive a lot through your Chapter 13 repayment plan and will be discharged upon completion of that plan. If you have a dischargeable debt that is secure you will have the option to keep that property and continue making payments or surrender the property and discharge your liability for it.
Experienced Cherry Hill, NJ Bankruptcy Attorney Will Provide Guidance
With so many options for bankruptcy and so many different types of debt, it is easy to get overwhelmed during the process. It is important to have the knowledge and experience of a bankruptcy attorney at your disposal to help you through the bankruptcy process. If you are experiencing financial problems in Cherry Hill, New Jersey, you should turn to the Law Office of Joel R. Spivack. With years of experience helping clients work through their debt and bankruptcy, there is no better choice. Fill out the online contact form to schedule your consultation today.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.