Bankruptcy is a debt solution that helps thousands of people every year. It offers economic relief and stress relief by reducing an overwhelming financial burden. But not every type of debt is eligible to be discharged.
Filing for bankruptcy can wipe out many eligible debts
In 2016, more than 9,000 Minnesotans sought freedom from their debts by filing for bankruptcy. The most common forms of debt are covered by bankruptcy:
- Credit card debt
- Medical bills and dental expenses
- Personal loans
- Some taxes
These debts can grow uncontrollably and become compounded over time with high interest rates, impossible balances and deadlines, and additional obligations. Such debt leads to harassing creditor phone calls to your home and office that attempt to bully you into paying more than you can afford. Chapter 7 and Chapter 13 bankruptcy offer solutions to begin the process of discharging your debt and stopping creditors from calling you and garnishing your income.
Not every debt is discharged through bankruptcy
Non-dischargeable debts are excluded from bankruptcy and many other debt solutions. There are numerous types of debts that cannot be discharged in bankruptcy:
- Student loans
- Child support
- Criminal fines and restitution
- Some personal injury obligations
- State and federal tax obligations
- Any debt not included in your Chapter 13 bankruptcy petition
- Loans your obtained through fraud or providing false information
- Outstanding mortgages that survived bankruptcy
You are still responsible for making these payments during and after bankruptcy is complete. If you have missed any payments on these debts during or prior to your bankruptcy, you will be responsible for making those payments to bring your debts current. Under Chapter 13 bankruptcy, past-due payments on mortgages and car loans can be included in debt reorganization and repaid over the 3-5 year payment plan.
Additionally, the bankruptcy court judge in your case may determine if other debts will be included in bankruptcy or considered non-dischargeable, meaning you have to pay them back even after bankruptcy:
- Cash advances, loans taken out, or luxury items valued at $1,150 or more within 60 days of filing
- Debts from embezzlement, larceny or fraud
- Debts owed due to willful personal injury or property damage
Secured and unsecured assets
Secured debts are loans for which a piece of property has been pledged as collateral. For example, when you buy a home and take out a mortgage, you agree to make payments on the mortgage loan and if you fail to make payments, the bank will take back your house. The house is the collateral for paying your bills.
Usually, houses and car loans are considered secured debts, in which a person has put up property as collateral for the loan. However, if you are not up to date on the payments for that secured debt, the creditor retains their ability to repossess the collateral that you have. Your experienced bankruptcy attorney can confirm the security and protection of your major assets prior to deciding which chapter of bankruptcy is most effective.
Contact a Twin Cities debt relief attorney today
Every financial situation is unique and requires an experienced, diligent bankruptcy attorney. Find the debt solution that is right for you by calling Martin & Hedervare PLLC at (651) 383-4725 or contacting us online today. During your free in-office bankruptcy case consultation, we will discuss your best path to a fresh financial start.