Understanding Dischargeable Debts in Bankruptcy

If you are contemplating bankruptcy, the most important thing that you can do is understand what is dischargeable.

What Does Dischargeable Mean?

A dischargeable debt in bankruptcy is a debt that will be forgiven once the case is filed and the case is confirmed by the court.

For instance, if John’s wages are being garnished by his student loan company, then, he will want a discharge of the student loan debt. Unfortunately for John, student loan debt is not dischargeable in a bankruptcy. It will not be forgiven. For that reason, he will likely file for a reorganizational bankruptcy under Chapter 13.

Why Not All Debts Are Equal

From the example above, we learn that not all debt is equal. Therefore, one cannot simply think that filing bankruptcy will resolve everything if their objectives are not aligned with bankruptcy law.

If your objective is to get debt relief, you have to organize your debts into the following categories:

Types of Debts in Bankruptcy

1. Priority Debt
2. Unsecured Debt
3. Secured Debt

Priority Debts Include:

  • Student loans
  • Child support
  • Alimony
  • Tax debt (with some exceptions)

Unsecured Debts Include:

  • Everything besides Priority debt
  • No collateral involved

Secured Debt Includes:

  • Anything that is attached to collateral
  • For example:
    • An auto loan is secured to the car; the car is the collateral

How Our Office Can Help

When you speak with somebody at our office, you will be able to understand if you qualify for bankruptcy and to what extent your debts will be discharged.

Frequently Asked Questions

What is a dischargeable debt in bankruptcy?

A dischargeable debt is a financial obligation that can be legally eliminated through bankruptcy. Once the bankruptcy case is approved by the court, the individual is no longer responsible for repaying that specific debt.

Are student loans dischargeable in bankruptcy?

Generally, student loans are not dischargeable in bankruptcy. Exceptions may apply in rare cases involving undue hardship, but most people must continue repaying their student loans even after filing.

What types of debts are considered priority in bankruptcy?

Priority debts include student loans, child support, alimony, and certain tax debts. These typically cannot be discharged and must be repaid in full or in part during bankruptcy proceedings.

How do secured debts differ from unsecured debts?

Secured debts are tied to collateral, such as a car loan attached to a vehicle. Unsecured debts, on the other hand, have no collateral and include things like credit card balances and medical bills.

Can filing for bankruptcy eliminate all my debts?

No, bankruptcy does not eliminate all debts. Only dischargeable debts can be forgiven, and certain obligations, like priority debts, must still be paid. It’s important to categorize debts correctly to understand what relief bankruptcy can offer.

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