Financial struggles can strike at any time, and no one is immune. Even the wealthiest- or highest-income earners may find themselves in a situation where they are unable to keep up with their debts and pay bills on a regular basis. Over time, unpaid bills can accumulate, interest can start to add up, and you may find yourself choosing which bill you should pay because you know that you cannot pay them all.
If you find yourself in a situation similar to this one, you likely feel overwhelmed by your circumstances. It may not seem like it at the time, but there is a way out. By filing for bankruptcy, you may be able to discharge some of these debts and work toward a better and stronger financial future.
What happens to debt in bankruptcy?
There are two main types of consumer debt: secured and unsecured. Typically, unsecured debt is eligible for discharge through bankruptcy. Examples of this include:
- Credit card debt
- Medical bills
- Retail credit lines
Often, people with a large amount of unsecured debt find benefit in seeking protection by filing for Chapter 7 bankruptcy. This process lasts just a few months, and most applicants emerge from the process with most debts completely discharged and their liability on owed balances cancelled. For those not eligible for Chapter 7, Chapter 13 may be an option. This type of bankruptcy is a common choice for individuals with a significant amount of secured debt, including:
- Mortgages
- Car loans
- Various types of debt not eligible for discharge under Chapter 7
Chapter 13 bankruptcy may offer you the option to discharge some of the debts that you cannot get rid of through Chapter 7. This includes some payments that you owe for matrimonial property settlements.
Debts not eligible for discharge
Not every type of debt is eligible for discharge through bankruptcy. Under the current bankruptcy laws, you will not be able to alleviate your liability for outstanding balances owed for the following:
- Student loans
- Past-due child support
- Some back taxes
In some rare cases, there could be exemptions for individuals facing extreme hardship. Regardless of your situation or the types of debt you owe, you will find it beneficial to discuss your options with an attorney who can carefully evaluate your situation and correctly identify the most appropriate option for you.
When you seek the help and counsel of a bankruptcy attorney, you can have a full understanding of your rights and the steps you can take to secure a strong financial future. Depending on the type of debt you have and your current financial circumstances, either Chapter 7 or Chapter 13 may offer you a way to effectively deal with the debt that has taken control of your life.