Filing Chapter 7 bankruptcy is a great way to discharge debts for people who are having debt problems. As a matter of fact, one of the main goals of people filing for Chapter 7 bankruptcy is to discharge their debts, and have a fresh start. But, since the bankruptcy reform in 2005, there has been some uncertainty about what debts can be discharged under Chapter 7 Bankruptcy. Truth is, not all debts can be discharged.
What are Dischargeable Debts?
Before we get to the definition of dischargeable debt, let us first of all define the term “discharge”. A discharge, in relation to bankruptcy, is relieving a debtor of all, or some of his debts, and preventing creditors from taking any actions against the debtor regarding the debts. This means that the debtor is granted a clean slate, an opportunity to start from the “beginning” with total immunity against some or all of his debts. Now, to define dischargeable debt, one can say that these kinds of debts are debts cancelled as a legal right of a debtor who filed for bankruptcy under Chapter 7.
What Debts can/cannot be Discharged?
It has been mentioned earlier that not all debts can be discharged. The question now is – what debts can be discharged? Well, it is easier to mention what debts cannot be discharged seeing that almost all debts can be discharged, but your Dischargeable Debts Attorney in Los Angeles and San Fernando Valley California is always ready to enlighten you. Here is a list of some common category of debts that can be discharged:
• Credit card debts:
Debts under this category (including late payment and overdue fees) can take months to be cleared under Chapter 7 bankruptcy. Under Chapter 13 bankruptcy, credit card debt is reorganized in a way that the debtor can conveniently clear off the debt; usually within a period of three to five years.
• Medical bills:
Filing bankruptcy is required in cases where there is a huge medical bill arising from ailment that is not covered by health insurance. It is possible that the debtor might have become unable to work due to ill health or even lost his/her insurance covers.
• Utility bills:
Filing for bankruptcy can discharge your water, telephone, electric, gas and sewer bills. Once you file for bankruptcy protection, the utility company has no right to collect your past due utility bill.
• Collection agency account:
Collection agency is a business that specializes in debt collection. Most collection agencies operate as agents for creditors, and collect debts on behalf of the creditors for a fee proportional to the total amount owed. Debtors that file for bankruptcy under either chapter 7 or chapter 13, stand a chance of having their collection agency account eliminated.
• Personal loans from family, friends, and employers:
Personal loans of this sort falls under common category of debts that can be discharged in bankruptcy.
• Civil court judgment that is not based on fraud:
Civil court judgment that is not based on fraud can be discharged by bankruptcy. Instances include cases of civil rights violations, losses due to unprofitable investments or accidents, disputes in contract, damages of property, etc.
• Auto accident claims that do not involve driving drunk:
If you are the cause of an auto crash, you are likely to pay compensation to cover for the damages that may arise as a result of the accident. These compensations can be discharged by bankruptcy. However, an auto accident claim can only be discharged if it does not involve driving drunk or drugged.
• Business debts:
If your business bank account is empty and you are in a lot of debt, filing for bankruptcy will discharge your business debts.
Other debts that can be discharged on the event of bankruptcy include:
• Debts under lease agreement.
• Repossession deficiency balances.
• Veteran’s assistance loans and overpayments.
• Attorney fees (excluding child support/alimony gifts).
• Charge accounts (revolving) excluding extended payment charges.
• Social security over-payment.
Debts Exempted From Discharge
It is important to note that any future debts incurred by the debtor after filing for Chapter 7 Bankruptcy is exempted from discharge. As a professional Dischargeable Debts Attorney in Los Angeles and San Fernando Valley California
, I always advise my clients to watch out for the following list of debts exempted from discharge:
• Child support and alimony: Bankruptcy does not discharge a court’s judgment requiring the payment of family support and obligations.
• Criminal penalties: It is often required that a convicted criminal pays a penalty or fee to the government, known as criminal restitution. This is an obligation that cannot be discharged in bankruptcy.
• Certain types of unpaid taxes and fines: There are certain types of taxes that cannot be discharged in bankruptcy. Such taxes include property tax, income tax, sales tax, etc.
• Government-funded or guaranteed student loan payment: In most cases, if not all, student loan debts are not discharged by bankruptcy; unless the debtor can prove beyond all reasonable doubt that he or she is going through “undue hardship” for being required to pay the student loan, which is very unlikely.
• Debts to condo or co-op housing
• Personal injury settlements
In some cases, debts can be settled through negotiation with creditors rather than being discharged through bankruptcy. Secured debts such as house loans and home mortgage are often settled through repossession of the asset (i.e. when the party with right of ownership takes back the asset that has been rented or leased) or foreclosure of the house (i.e. a legal process where a mortgaged house is taken away from the debtor as a result of failure to keep up with mortgage payments).
Dischargeable Debts Revoked
There are certain conditions where a court would have to revoke the discharge that has been granted to a debtor. The creditor, trustee, or U.S. trustee may request that the court revoke the debtors discharge on the occasion that the debtor is found guilty of the following allegations:
• Failure by the debtor to provide necessary documents needed for the audit of the case.
• Failure to explain any misstatement in an audit of the case.
• Failure to state that he or she will acquire property that constitutes property of the bankruptcy case.
• Obtained the discharge in a fraudulent manner.
Contact the Leventhal Law Group, P.C. I specialize in helping individuals and small-to-medium sized businesses file for Chapter 11 Bankruptcy, Chapter 7 Bankruptcy, or Chapter 13 Bankruptcy as the case may be. My office offers free consultations too. Call me today at 818-347-5800