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Will all my debts be discharged in bankruptcy?

On Behalf of | Aug 2, 2016 | Chapter 7

If you are buried under unmanageable debt and seeking a way out, bankruptcy may very well be one of the options you have taken into consideration. However, if you don’t know very much about bankruptcy, which is not unusual for people going through it for the first time, you could find yourself believing some myths and half-truths about the process.

For instance, you might think that all your debts are wiped clear through bankruptcy. However, this isn’t necessarily true. Now, before you decide to write off this option because it may not completely wipe the slate clean, you should understand which debts could remain after a bankruptcy filing and why it can still be a good solution.

Debts that are generally not discharged are those that Congress has determined to be contrary to public policy. These include:

  • Unpaid taxes
  • Civil penalties for drunk driving
  • Government-funded educational loans
  • Alimony
  • Child support
  •  Co-op or condo housing fees

    Some of these debts are the result of so-called “bad behavior.” Others, like family support debts and money owed to the government, are considered priority debts. These debts are not dischargeable because repaying them is in the best interests of public policy, according to federal bankruptcy laws.

    You might be wondering, “What’s the point of filing for bankruptcy if I’m still left with debt?” The answer here is that it is much easier to pay non-dischargeable debts when others have been discharged.

    Let’s imagine you, like most people, have a few different sources of debt: medical bills, credit card debts and hefty student loans. Should you file for Chapter 7 bankruptcy, you would likely be able to have the debt from your medical bills and credit cards discharged, though your student loans would remain.

    Without the obligation to pay off medical and credit card debt, you will have more money to dedicate to your student loan payments. So even though debts remain after filing bankruptcy, they become much more manageable when other debts are discharged.

    Every dollar counts when you are trying to get out of debt, so it will be crucial that you understand which of your debts can and cannot be discharged in bankruptcy. Discussing the specifics of your situation with a bankruptcy attorney can be critical in helping you make choices that set you up for success and a better financial future.


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