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Myth: Filing Chapter 13 bankruptcy won’t allow me to discharge my debts.
Fact: In fact, the rules concerning the discharge of debts in bankruptcy are more liberal in a Chapter 13 bankruptcy case than in a Chapter 7 bankruptcy case.
Chapter 13 is a debt repayment that allows you to obtain relief for many types of debts. Under a Chapter 13 repayment plan, a bankruptcy attorney will help you create a plan to pay back a percentage of your debts over three to five years.
A Chapter 13 payment plan must offer to pay the full amount of all priority claims and all secured claims such as your car and home. This means full payment all principal, plus all accrued interest and penalties due through the date the bankruptcy case is filed. In a case where a car is older than 3 years and the loan is “upside down”, the difference between value and the amount owed on the car may be “crammed down”, ie. paid back as unsecured. Debt on a first mortgage is not subject to this “cram down” and the terms of the mortgage contract will continue in Chapter 13.
All general unsecured claims must be treated equally, and will receive a pro-rata share of any leftover funds. The Chapter 13 plan must propose to pay general unsecured claims between 0 and 100 percent of the claim amount, depending on how much you can afford to pay.
If your budget shows that you cannot afford to pay any portion of the general unsecured claim, the plan may propose a 0 percent payout. If the budget shows that you can afford to pay some or the entire general unsecured claim, the plan must propose to pay the full amount you can afford to pay.
Your disposable income determines how much of the pre-filing debt must be repaid. All tax claims not classified as “secured” or “priority” claims are classified as “general unsecured” claims.
Your disposable income will be determined by the bankruptcy judge’s assessment of what living expenses are necessary and reasonable for you and your family.
Many of the expenses that are allowable in Chapter 13 are for things that you may not have been able to provide for your family because you are struggling to pay credit card debts. Here are a few examples:
Essentially, Chapter 13 bankruptcy gives you the choice of either paying credit card debts with interest rates approaching 30 percent per year or providing for your family’s financial security.
Chapter 13 bankruptcy may be the proper option if you are behind on home mortgage or vehicle payments and want to keep the property. It can also be a good option if you want to alter unfavorable terms of a loan agreement.
Filing Chapter 13 bankruptcy allows you to stop foreclosure on your home and arrange to pay the arrearage over three to five years.
A Chapter 13 repayment plan may also allow you to lower vehicle payments by reducing the debt to the value of the collateral, reducing the interest rate, and extending the term of the loan. Suppose you had a vehicle loan that you obtained three years ago and you have two years left to pay on the loan. Let’s also assume the payoff amount is $20,000 and the interest rate is 18 percent. If the market value of the vehicle is $10,000, you can propose a three-year bankruptcy plan that pays $10,000 at a lower interest rate. If accepted, the creditor must transfer the title free and clear of the lien after all payments under the plan have been completed.
Chapter 13 bankruptcy can also be used to reorganize a small business. In business cases, a debtor can repay debts (or arrearages on loan payments) in installments over three to five years. A small business owner may also use the “cram down” provisions of the bankruptcy laws to reduce installment payments and the interest rate paid on secured debts. A small business owner can also use Chapter 13 to selectively reject unfavorable contracts or unexpired leases.
The rules concerning the discharge of debts in bankruptcy are more liberal in Chapter 13 bankruptcy cases than in Chapter 7 bankruptcy. A Chapter 13 discharge is commonly known as a “super discharge” because certain debts can be discharged in a Chapter 13 case that cannot be discharged in a Chapter 7 bankruptcy case.
The laws concerning the Chapter 13 bankruptcy super discharge are complex and have changed recently so you should consult a bankruptcy lawyer if you think you may qualify.
Fact: While Chapter 7 bankruptcy is commonly called “liquidation” bankruptcy, in most personal bankruptcy cases, debtors are allowed to keep their property either because the property is exempt from seizure or it is so low in value that the trustee will elect to abandon it.
A bankruptcy filing under Chapter 7 allows individuals to eliminate most unsecured debts (debts that are not secured by tangible assets such as your home and your car). A bankruptcy attorney can explain the difference between secured and unsecured debts.
The main reason for filing any bankruptcy case is to obtain a “discharge” or release of debts. In a Chapter 7 case, the debtor is not required to pay any of the debts owed to most unsecured creditors. However, you may elect to reaffirm (remain personally liable to pay) specific debts for secured assets you want to keep.
In the vast majority of all consumer Chapter 7 bankruptcy cases, the debtor will keep all property and eliminate most debts. The entire process is normally over, and the case is closed, within approximately four months after it is filed.
Chapter 7 bankruptcy is a good option to consider if you:
With certain exceptions, Chapter 7 bankruptcy allows people to obtain relief from personal loans, credit card debts, deficiency claims on repossessed vehicles or foreclosed real estate, auto accident claims, judgments, business debts, leases, personal guaranties, and negligence claims. Chapter 7 bankruptcy may allow you to obtain a discharge of certain tax debts such as prior year Federal income taxes. These taxes may be dischargeable provided the tax returns for those tax years were filed more than 2 years before the bankruptcy case is filed and are for tax years at least 3 years ago.
After the bankruptcy is over, you are legally entitled to selectively pay any, all, or none of your dischargeable debts. However, you cannot be legally compelled to pay any discharged debt. Creditors are legally required to stop all collection efforts, including all collection calls, letters, lawsuits, and garnishments.
A debtor begins the bankruptcy process by filing a petition with his or her local bankruptcy court. Once the petition is filed, an automatic stay goes into effect and your creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossessions
Do you have to have a certain amount of debt to file?
In a Chapter 7, you do not need a certain minimum amount of debt to file a bankruptcy. In a Chapter 13, there are debt ceilings for unsecured and secured debt that you must not exceed.
How long does a bankruptcy case take?
A Chapter 7 case normally takes three to four months from filing to discharge. Cases can stay open longer if the bankruptcy estate recovers any assets, but the discharge will still arrive around the same period. The average for the length of a Chapter 13 bankruptcy is three to five years.
How does bankruptcy stop my creditors from harassing me?
As soon as your case is filed, creditors are not allowed to contact you for the duration of the bankruptcy unless they receive permission from the court. If you are in the process of filing a bankruptcy and have an attorney, then you can tell any creditors who are contacting you that you are going to file and give them your attorney’s information so they can verify that you are indeed going to file bankruptcy soon.
Under what circumstances can I discharge my student loans in bankruptcy?
You must show that the payment of the student debt “will impose an undue hardship on you and your dependents.” Typically, this test requires you to show that you cannot maintain even a “minimal” standard of living if you have to pay your loans and this situation is likely to continue for a significant part of your repayment term. Outside of these extremely unique circumstances, you will be unable to discharge student loans in bankruptcy.
Can I eliminate back income taxes by filing bankruptcy?
Yes, some back income taxes can be eliminated in a bankruptcy proceeding. Certain requirements must be met:
If the taxes are discharged, the taxing authority cannot go after your wages or bank account. But if it placed a lien on your real estate, the lien will remain and will need to be paid off when the property is sold.
Can bankruptcy help me if I am behind on my mortgage or my home is in foreclosure?
Both Chapter 7 and Chapter 13 offer advantages depending on individual circumstances.
Filing a Chapter 7 bankruptcy may be the best option as immediately upon filing, the bankruptcy creates a freeze (called an automatic stay) which stops creditors from continuing their foreclosure efforts. Many debtors wait until their house’s sale date to file their bankruptcy, which can substantially extend their time in the house.
If you are behind on mortgage payments, you might be best served by filing a Chapter 13. A Chapter 13 reorganizes your debt and prevents creditors from collecting immediately upon filing. You then must come up with a repayment plan to catch up on the late payments, as well as make your current mortgage payments in a timely manner.
Can bankruptcy help if I am behind on my car payments or if my car has already been repossessed?
Chapter 7 bankruptcy can eliminate that debt and help you recover. If bankruptcy is not filed in this situation, your creditors can get a judgment against you and will start trying to collect on it by garnishing your wages or seizing your bank accounts.
Chapter 13 is also an option for the debtor who is behind with car payments. The filing will freeze the creditors before they are able to seize the car and you could propose a repayment plan that if accepted by the court and not objected to by the creditor, could save the vehicle. Chapter 13 can also, in certain situations, lower the balance owed and interest rate on the vehicle.
Can bankruptcy help me if my wages have been garnished?
If you file for bankruptcy Chapter 7, the wage garnishing will stop immediately and, at the conclusion of the bankruptcy, the debt on which you were being garnished should be discharged.
While wage garnishing will also cease in a Chapter 13 bankruptcy, some of the debt might have to be paid as part of the debtor’s repayment plan. There are not many options outside of bankruptcy that can stop a wage garnishment. It would be smart to consider bankruptcy in these situations so no more monthly income is wasted on an old debt.
If I file for bankruptcy, does my spouse have to file for bankruptcy as well?
No, you are not required to file bankruptcy if your spouse files bankruptcy. However, it could be in your best interest to do so. If you share multiple debts with your spouse or have debt issues of your own, it might better to file with your spouse than to file later on your own.
What Debts Cannot Be Discharged?
Bankruptcy will not get rid of student loans, personal injury awards caused by driving under the influence, court fines and criminal restitution, alimony, or child support.
Tax debts incurred within the last 3 years are not dischargeable in bankruptcy, but taxes owed for returns filed more than 3 years ago are usually dischargeable.
If you took a large cash advance or made unusually large credit card charges within 6 months of filing bankruptcy, the creditor has the legal right to object to this debt from being discharged.
On the other hand, debts commonly relieved by bankruptcy include medical bills, personal loans, collection accounts, money judgments that do not claim fraud, deficiency balances, and credit card debt.
How Does Chapter 7 Bankruptcy Work?
Chapter 7 bankruptcy is designed to discharge unsecured debt. In other words, it can discharge debt that is not backed by some form of collateral. This includes medical expenses, credit card bills, delinquent utility bills, and more.
On the other hand, debt like mortgage payments and car loans, which are backed by the property itself, must be handled differently. You are still entitled to make payments on car loans and mortgage payments, but in order to avoid repossession or foreclosure, you must stay current with those payments.
If you are charged fees related to nonpayment and intend on forfeiting your car or allowing the bank to foreclose on your property, those charges can be discharged in Chapter 7.
However, not all kinds of unsecured loans are available for discharge. Below, we’ll discuss the types of loans that cannot be discharged and how you can manage them.
Nondischargeable Debts
Debts Not Listed on Your Bankruptcy
In order for a debt to be discharged in Chapter 7, you will be required to list that in your bankruptcy paperwork. Any debt that is left off the paperwork will not be discharged nor will you be able to add that debt after the discharge has been granted. In other words, you’re stuck with it.
Tax Debts That Can’t Be Discharged
There are certain kinds of taxes that can be discharged in Chapter 7 bankruptcy and there are others that cannot. Understanding the difference can be vital to your decision to file or not.
Chapter 7 Bankruptcy can wipe out taxes when the following elements are all true:
Debts for Child Support or Alimony
If you owe an ex-spouse money for child support or alimony, this cannot be discharged in Chapter 7. In addition, any debts arising from a divorce and owed to your former spouse will not be discharged in Chapter 7. Chapter 7 can, however, discharge other debts that will free up your finances to get caught up on child support or alimony.
Administrative Fines or Penalties
Chapter 7 Bankruptcy will not discharge any debts that you owe the government. For instance, if you owe thousands of dollars in unpaid parking tickets or fines resulting from other violations, you will still have to repay them.
Court ordered restitution in a criminal case cannot be discharged in Chapter 7.
A judgment resulting from a personal injury lawsuit for driving under the influence of drugs or alcohol, that judgment is not dischargeable in Chapter 7.
Homeowners Association Fees
Homeowners association fees or fees related to condominium ownership cannot be discharged in Chapter 7.
Federal Student Loans
Federal student loans can generally not be discharged in bankruptcy. There are some cases where you may be able to petition the court to discharge your student loans. However, the court rarely grant this. You would need to show an incapacity to work. When successful, there is usually a serious medical event involved.
Debts Incurred Immediately Before Bankruptcy
If you go out and purchase yourself thousands of dollars in luxury items and then file for bankruptcy, a creditor can object to the discharge. When successful, you will be on the hook for that amount of money. The creditor will be able to pursue that debt using whatever legal means necessary.
Can Chapter 13 Bankruptcy Discharge These Debts?
Chapter 13 sets up a repayment plan but it also discharges several kinds of unsecured debt. The repayment plan must make sense over a five-year period and must be in accord with your income and finances. In addition, there are limits to how much debt you can owe when filing for Chapter 13.
Chapter 13 cannot discharge the aforementioned debts, but it can roll them into a repayment plan. The debts, however, will survive the bankruptcy. For instance, let’s say you owe $50,000 in student loans. You can rehabilitate the loans by making payments and then continue to make payments throughout the bankruptcy. But after your Chapter 13 has successfully completed, whatever you owe will remain.
In essence, Chapter 13 bankruptcy will give you a way to manage these debts while you’re discharging those debts that can be discharged.
Is it Worth Filing Chapter 7 Bankruptcy?
Probably. Once a creditor obtains a judgment against you, they can:
• place liens on your property,
• garnish your wages, or
• levy your bank account.
•
By discharging these debts, you free yourself from aggressive creditor actions. This will free up your finances to pay those debts that cannot be discharged in Chapter 7.
Talk to a Memphis Bankruptcy Attorney Today
At The Janet M. Lane Law Firm, we help those struggling with mounting debts to gain a fresh financial start. Our experienced Memphis TN bankruptcy attorney can advise you regarding which chapter of bankruptcy best suits your situation. We can also inform you as to alternatives to bankruptcy, or fight increasingly aggressive creditor actions against you. Contact us today to work with a bankruptcy lawyer who cares about your situation.
Myth: Filing Chapter 13 bankruptcy won’t allow me to discharge my debts.
Fact: In fact, the rules concerning the discharge of debts in bankruptcy are more liberal in a Chapter 13 bankruptcy case than in a Chapter 7 bankruptcy case.
Chapter 13 is a debt repayment that allows you to obtain relief for many types of debts. Under a Chapter 13 repayment plan, a bankruptcy attorney will help you create a plan to pay back a percentage of your debts over three to five years.
A Chapter 13 payment plan must offer to pay the full amount of all priority claims and all secured claims such as your car and home. This means full payment all principal, plus all accrued interest and penalties due through the date the bankruptcy case is filed. In a case where a car is older than 3 years and the loan is “upside down”, the difference between value and the amount owed on the car may be “crammed down”, ie. paid back as unsecured. Debt on a first mortgage is not subject to this “cram down” and the terms of the mortgage contract will continue in Chapter 13.
All general unsecured claims must be treated equally, and will receive a pro-rata share of any leftover funds. The Chapter 13 plan must propose to pay general unsecured claims between 0 and 100 percent of the claim amount, depending on how much you can afford to pay.
If your budget shows that you cannot afford to pay any portion of the general unsecured claim, the plan may propose a 0 percent payout. If the budget shows that you can afford to pay some or the entire general unsecured claim, the plan must propose to pay the full amount you can afford to pay.
Your disposable income determines how much of the pre-filing debt must be repaid. All tax claims not classified as “secured” or “priority” claims are classified as “general unsecured” claims.
Your disposable income will be determined by the bankruptcy judge’s assessment of what living expenses are necessary and reasonable for you and your family.
Many of the expenses that are allowable in Chapter 13 are for things that you may not have been able to provide for your family because you are struggling to pay credit card debts. Here are a few examples:
Essentially, Chapter 13 bankruptcy gives you the choice of either paying credit card debts with interest rates approaching 30 percent per year or providing for your family’s financial security.
Chapter 13 bankruptcy may be the proper option if you are behind on home mortgage or vehicle payments and want to keep the property. It can also be a good option if you want to alter unfavorable terms of a loan agreement.
Filing Chapter 13 bankruptcy allows you to stop foreclosure on your home and arrange to pay the arrearage over three to five years.
A Chapter 13 repayment plan may also allow you to lower vehicle payments by reducing the debt to the value of the collateral, reducing the interest rate, and extending the term of the loan. Suppose you had a vehicle loan that you obtained three years ago and you have two years left to pay on the loan. Let’s also assume the payoff amount is $20,000 and the interest rate is 18 percent. If the market value of the vehicle is $10,000, you can propose a three-year bankruptcy plan that pays $10,000 at a lower interest rate. If accepted, the creditor must transfer the title free and clear of the lien after all payments under the plan have been completed.
Chapter 13 bankruptcy can also be used to reorganize a small business. In business cases, a debtor can repay debts (or arrearages on loan payments) in installments over three to five years. A small business owner may also use the “cram down” provisions of the bankruptcy laws to reduce installment payments and the interest rate paid on secured debts. A small business owner can also use Chapter 13 to selectively reject unfavorable contracts or unexpired leases.
The rules concerning the discharge of debts in bankruptcy are more liberal in Chapter 13 bankruptcy cases than in Chapter 7 bankruptcy. A Chapter 13 discharge is commonly known as a “super discharge” because certain debts can be discharged in a Chapter 13 case that cannot be discharged in a Chapter 7 bankruptcy case.
The laws concerning the Chapter 13 bankruptcy super discharge are complex and have changed recently so you should consult a bankruptcy lawyer if you think you may qualify.
Fact: While Chapter 7 bankruptcy is commonly called “liquidation” bankruptcy, in most personal bankruptcy cases, debtors are allowed to keep their property either because the property is exempt from seizure or it is so low in value that the trustee will elect to abandon it.
A bankruptcy filing under Chapter 7 allows individuals to eliminate most unsecured debts (debts that are not secured by tangible assets such as your home and your car). A bankruptcy attorney can explain the difference between secured and unsecured debts.
The main reason for filing any bankruptcy case is to obtain a “discharge” or release of debts. In a Chapter 7 case, the debtor is not required to pay any of the debts owed to most unsecured creditors. However, you may elect to reaffirm (remain personally liable to pay) specific debts for secured assets you want to keep.
In the vast majority of all consumer Chapter 7 bankruptcy cases, the debtor will keep all property and eliminate most debts. The entire process is normally over, and the case is closed, within approximately four months after it is filed.
Chapter 7 bankruptcy is a good option to consider if you:
With certain exceptions, Chapter 7 bankruptcy allows people to obtain relief from personal loans, credit card debts, deficiency claims on repossessed vehicles or foreclosed real estate, auto accident claims, judgments, business debts, leases, personal guaranties, and negligence claims. Chapter 7 bankruptcy may allow you to obtain a discharge of certain tax debts such as prior year Federal income taxes. These taxes may be dischargeable provided the tax returns for those tax years were filed more than 2 years before the bankruptcy case is filed and are for tax years at least 3 years ago.
After the bankruptcy is over, you are legally entitled to selectively pay any, all, or none of your dischargeable debts. However, you cannot be legally compelled to pay any discharged debt. Creditors are legally required to stop all collection efforts, including all collection calls, letters, lawsuits, and garnishments.
A debtor begins the bankruptcy process by filing a petition with his or her local bankruptcy court. Once the petition is filed, an automatic stay goes into effect and your creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossessions
Do you have to have a certain amount of debt to file?
In a Chapter 7, you do not need a certain minimum amount of debt to file a bankruptcy. In a Chapter 13, there are debt ceilings for unsecured and secured debt that you must not exceed.
How long does a bankruptcy case take?
A Chapter 7 case normally takes three to four months from filing to discharge. Cases can stay open longer if the bankruptcy estate recovers any assets, but the discharge will still arrive around the same period. The average for the length of a Chapter 13 bankruptcy is three to five years.
How does bankruptcy stop my creditors from harassing me?
As soon as your case is filed, creditors are not allowed to contact you for the duration of the bankruptcy unless they receive permission from the court. If you are in the process of filing a bankruptcy and have an attorney, then you can tell any creditors who are contacting you that you are going to file and give them your attorney’s information so they can verify that you are indeed going to file bankruptcy soon.
Under what circumstances can I discharge my student loans in bankruptcy?
You must show that the payment of the student debt “will impose an undue hardship on you and your dependents.” Typically, this test requires you to show that you cannot maintain even a “minimal” standard of living if you have to pay your loans and this situation is likely to continue for a significant part of your repayment term. Outside of these extremely unique circumstances, you will be unable to discharge student loans in bankruptcy.
Can I eliminate back income taxes by filing bankruptcy?
Yes, some back income taxes can be eliminated in a bankruptcy proceeding. Certain requirements must be met:
If the taxes are discharged, the taxing authority cannot go after your wages or bank account. But if it placed a lien on your real estate, the lien will remain and will need to be paid off when the property is sold.
Can bankruptcy help me if I am behind on my mortgage or my home is in foreclosure?
Both Chapter 7 and Chapter 13 offer advantages depending on individual circumstances.
Filing a Chapter 7 bankruptcy may be the best option as immediately upon filing, the bankruptcy creates a freeze (called an automatic stay) which stops creditors from continuing their foreclosure efforts. Many debtors wait until their house’s sale date to file their bankruptcy, which can substantially extend their time in the house.
If you are behind on mortgage payments, you might be best served by filing a Chapter 13. A Chapter 13 reorganizes your debt and prevents creditors from collecting immediately upon filing. You then must come up with a repayment plan to catch up on the late payments, as well as make your current mortgage payments in a timely manner.
Can bankruptcy help if I am behind on my car payments or if my car has already been repossessed?
Chapter 7 bankruptcy can eliminate that debt and help you recover. If bankruptcy is not filed in this situation, your creditors can get a judgment against you and will start trying to collect on it by garnishing your wages or seizing your bank accounts.
Chapter 13 is also an option for the debtor who is behind with car payments. The filing will freeze the creditors before they are able to seize the car and you could propose a repayment plan that if accepted by the court and not objected to by the creditor, could save the vehicle. Chapter 13 can also, in certain situations, lower the balance owed and interest rate on the vehicle.
Can bankruptcy help me if my wages have been garnished?
If you file for bankruptcy Chapter 7, the wage garnishing will stop immediately and, at the conclusion of the bankruptcy, the debt on which you were being garnished should be discharged.
While wage garnishing will also cease in a Chapter 13 bankruptcy, some of the debt might have to be paid as part of the debtor’s repayment plan. There are not many options outside of bankruptcy that can stop a wage garnishment. It would be smart to consider bankruptcy in these situations so no more monthly income is wasted on an old debt.
If I file for bankruptcy, does my spouse have to file for bankruptcy as well?
No, you are not required to file bankruptcy if your spouse files bankruptcy. However, it could be in your best interest to do so. If you share multiple debts with your spouse or have debt issues of your own, it might better to file with your spouse than to file later on your own.
What Debts Cannot Be Discharged?
Bankruptcy will not get rid of student loans, personal injury awards caused by driving under the influence, court fines and criminal restitution, alimony, or child support.
Tax debts incurred within the last 3 years are not dischargeable in bankruptcy, but taxes owed for returns filed more than 3 years ago are usually dischargeable.
If you took a large cash advance or made unusually large credit card charges within 6 months of filing bankruptcy, the creditor has the legal right to object to this debt from being discharged.
On the other hand, debts commonly relieved by bankruptcy include medical bills, personal loans, collection accounts, money judgments that do not claim fraud, deficiency balances, and credit card debt.
How Does Chapter 7 Bankruptcy Work?
Chapter 7 bankruptcy is designed to discharge unsecured debt. In other words, it can discharge debt that is not backed by some form of collateral. This includes medical expenses, credit card bills, delinquent utility bills, and more.
On the other hand, debt like mortgage payments and car loans, which are backed by the property itself, must be handled differently. You are still entitled to make payments on car loans and mortgage payments, but in order to avoid repossession or foreclosure, you must stay current with those payments.
If you are charged fees related to nonpayment and intend on forfeiting your car or allowing the bank to foreclose on your property, those charges can be discharged in Chapter 7.
However, not all kinds of unsecured loans are available for discharge. Below, we’ll discuss the types of loans that cannot be discharged and how you can manage them.
Nondischargeable Debts
Debts Not Listed on Your Bankruptcy
In order for a debt to be discharged in Chapter 7, you will be required to list that in your bankruptcy paperwork. Any debt that is left off the paperwork will not be discharged nor will you be able to add that debt after the discharge has been granted. In other words, you’re stuck with it.
Tax Debts That Can’t Be Discharged
There are certain kinds of taxes that can be discharged in Chapter 7 bankruptcy and there are others that cannot. Understanding the difference can be vital to your decision to file or not.
Chapter 7 Bankruptcy can wipe out taxes when the following elements are all true:
Debts for Child Support or Alimony
If you owe an ex-spouse money for child support or alimony, this cannot be discharged in Chapter 7. In addition, any debts arising from a divorce and owed to your former spouse will not be discharged in Chapter 7. Chapter 7 can, however, discharge other debts that will free up your finances to get caught up on child support or alimony.
Administrative Fines or Penalties
Chapter 7 Bankruptcy will not discharge any debts that you owe the government. For instance, if you owe thousands of dollars in unpaid parking tickets or fines resulting from other violations, you will still have to repay them.
Court ordered restitution in a criminal case cannot be discharged in Chapter 7.
A judgment resulting from a personal injury lawsuit for driving under the influence of drugs or alcohol, that judgment is not dischargeable in Chapter 7.
Homeowners Association Fees
Homeowners association fees or fees related to condominium ownership cannot be discharged in Chapter 7.
Federal Student Loans
Federal student loans can generally not be discharged in bankruptcy. There are some cases where you may be able to petition the court to discharge your student loans. However, the court rarely grant this. You would need to show an incapacity to work. When successful, there is usually a serious medical event involved.
Debts Incurred Immediately Before Bankruptcy
If you go out and purchase yourself thousands of dollars in luxury items and then file for bankruptcy, a creditor can object to the discharge. When successful, you will be on the hook for that amount of money. The creditor will be able to pursue that debt using whatever legal means necessary.
Can Chapter 13 Bankruptcy Discharge These Debts?
Chapter 13 sets up a repayment plan but it also discharges several kinds of unsecured debt. The repayment plan must make sense over a five-year period and must be in accord with your income and finances. In addition, there are limits to how much debt you can owe when filing for Chapter 13.
Chapter 13 cannot discharge the aforementioned debts, but it can roll them into a repayment plan. The debts, however, will survive the bankruptcy. For instance, let’s say you owe $50,000 in student loans. You can rehabilitate the loans by making payments and then continue to make payments throughout the bankruptcy. But after your Chapter 13 has successfully completed, whatever you owe will remain.
In essence, Chapter 13 bankruptcy will give you a way to manage these debts while you’re discharging those debts that can be discharged.
Is it Worth Filing Chapter 7 Bankruptcy?
Probably. Once a creditor obtains a judgment against you, they can:
• place liens on your property,
• garnish your wages, or
• levy your bank account.
•
By discharging these debts, you free yourself from aggressive creditor actions. This will free up your finances to pay those debts that cannot be discharged in Chapter 7.
Talk to a Memphis Bankruptcy Attorney Today
At The Janet M. Lane Law Firm, we help those struggling with mounting debts to gain a fresh financial start. Our experienced Memphis TN bankruptcy attorney can advise you regarding which chapter of bankruptcy best suits your situation. We can also inform you as to alternatives to bankruptcy, or fight increasingly aggressive creditor actions against you. Contact us today to work with a bankruptcy lawyer who cares about your situation.
Contact us to schedule a FREE consultation
Janet is a bankruptcy attorney in Memphis, TN. She proudly helps people file for Bankruptcy Relief under the Bankruptcy Code, and has been helping Memphians for over 30 years.
Address:
Janet M. Lane, Attorney at Law, Union Avenue, Memphis, TN, USA
Phone: (901) 219-8101
Email: [email protected]
Monday: 8:00am-5:00pm
Tuesday: 8:00am-5:00pm
Wednesday: 8:00am-5:00pm
Thursday: 8:00am-5:00pm
Friday: 8:00am-5:00pm
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