Bankruptcy can be a lifesaver for many people. Whether filing for Chapter 7 or Chapter 13 bankruptcy, the ability to legally eliminate or “discharge” debts can make the difference between a life of endless money problems and a life of financial abundance.
But it’s worth noting that there are many different categories of ‘debt.’ And under current bankruptcy law, only some of them can be discharged. Here are some of the most common categories of debt that can be discharged under Chapter 7 and Chapter 13 bankruptcy laws.
Credit Card Debt
The most common reason for filing bankruptcy is credit card debt. Fortunately, these debts are almost always discharged in bankruptcy. Typically, the only time these debts aren’t is when there is strong evidence of abuse or fraud, such as buying high-priced luxury goods and then filing for bankruptcy soon afterward.
With today’s high medical costs, it can be surprisingly easy to incur medical bills well into the six-figure range. For that reason, this is also among the most common causes for declaring bankruptcy. Fortunately, bankruptcy law provides for these bills to be discharged.
Lease and Contractual Obligations
Bankruptcy law provides for a wide range of leases and other contractual obligations to be discharged under Chapter 7 and Chapter 13. Among the relatively few exceptions are when the trustee decides to sell the contract to a third party to pay unsecured creditors.
Personal Loans and Promissory Notes
Debt from money you borrowed will almost always be discharged in bankruptcy. Like most types of debt, however, there are exceptions – typically involving fraud. But even so, it’s relatively uncommon for the court to refuse.
If you can’t pay off a lawsuit judgment, it can almost always be discharged by filing for bankruptcy. And it generally doesn’t matter what the reason for the lawsuit was. Furthermore, liens that are often triggered by lawsuit judgments can also be discharged in certain situations.
Whether you file for Chapter 7 or Chapter 13, the debts listed here are almost always discharged. But this is only a general overview – bankruptcy law allows for other debts to be discharged too, depending on your circumstances.
For that reason, you should consult a qualified bankruptcy attorney to discuss the specifics of your finances and personal situation. The additional cost of a lawyer can easily be offset by the money you gain from additional debts you’re eligible to discharge.