When you have more debt than you can repay, taking steps to get your finances back under control is critical. Bankruptcy can help you by both stopping aggressive collection activity as soon as you file and by providing you with the discharge of unsecured debts if the courts approve your filing.
Generally speaking, unsecured debts are the ones that people try to get rid of during bankruptcy proceedings. Common examples include medical debt owed to a hospital or credit card debt. There are many other minor debts that you can also possibly discharge, but there are also many types of debts that aren’t eligible for discharge in a bankruptcy.
You can’t discharge support owed to family members
If you are divorced or if you had children outside of marriage that you must pay child support for, back-due support can be a major source of debt. However, those debts are a personal responsibility backed by a court order. Most people will not be able to discharge spousal support or child support as part of a bankruptcy.
You probably can’t get rid of tax debt
Although there are exceptions, most tax debts are priority debts that an individual cannot discharge during bankruptcy. However, by being able to discharge other debts, you could potentially free up more of your income to go toward those taxes.
Most people can’t discharge their student loans
For many adults, student loan debt is the biggest financial burden that they carry other than a mortgage. Even if your student loan debt far exceeds what you can earn and you’ve never been able to get a job in the field where you earned a degree, the courts are unlikely to discharge that debt.
You probably can’t discharge personal injury awards
If someone has taken you to court because you caused the car crash that left them hurt or killed a member of their family, any debt from a judgment might represent more than you’ll earn in many years. However, such debts aren’t usually subject to discharge in bankruptcy the impact of your decisions on other people.
Sitting down to talk with a bankruptcy attorney can give you a better idea of what debts you can and can’t discharge so that you know how to move forward with the process.