ByFiling for bankruptcy can be a lifeline for those drowning in unmanageable debt. It offers a fresh start by discharging certain debts, freeing individuals from the obligation to repay them. However, not all debts are created equal when it comes to bankruptcy. Understanding which debts can be discharged and which ones might linger is crucial. If you’re considering bankruptcy, consulting with a knowledgeable debt attorney in Tampa, FL, can help you navigate these complexities.
What Is Debt Discharge?
Debt discharge is when a bankruptcy court releases a debtor from personal liability for specific types of debts. Once a debt is discharged, the debtor is no longer legally required to pay it. While this sounds like an ideal solution for financial woes, it’s important to recognize that not every debt can be discharged.
Types of Debts That Can Be Discharged
When you file for bankruptcy, several types of debts may be eligible for discharge. The exact nature of the discharge depends on the type of bankruptcy you file—Chapter 7 or Chapter 13. Here’s a closer look at the kinds of debts that are typically discharged in bankruptcy:
Credit Card Debt: Credit card debt is one of the most common types of debt discharged in bankruptcy. If you’ve accumulated significant balances on multiple credit cards, filing for bankruptcy can wipe out this debt, offering relief from high-interest payments.
Medical Bills: Unexpected medical expenses can quickly spiral out of control, especially without adequate health insurance. Fortunately, medical bills are generally dischargeable in bankruptcy, providing much-needed financial relief.
Personal Loans: Unsecured personal loans, meaning loans not backed by collateral, can also be discharged in bankruptcy. This includes payday loans, which often come with exorbitant interest rates.
Utility Bills: Past-due utility bills, such as those for electricity, water, and gas, can usually be discharged in bankruptcy, allowing you to focus on keeping your current services up to date.
Judgments from Lawsuits: If you’ve been sued and lost the case, leading to a monetary judgment against you, bankruptcy may discharge that debt, with some exceptions, such as judgments related to fraud or malicious conduct.
Certain Types of Business Debts: If you’re a business owner, some of your business debts may be discharged, depending on the nature of the debt and your role in the business.
Debts That Are Generally Non-Dischargeable
While bankruptcy offers a broad range of debt relief, some obligations are not so easily dismissed. Certain debts are deemed too important or complex to be discharged, often requiring continued payment. Here are some examples:
Student Loans: Student loans are relatively easy to discharge in bankruptcy. Although not impossible, you would need to prove that repaying the loan would cause “undue hardship”—a very challenging standard to meet. Most people who file for bankruptcy will still need to repay their student loans.
Tax Obligations: Tax debts are another category that cannot be easily discharged. Older tax debts may be eligible for discharge if they meet specific criteria, but recent tax debts, payroll taxes, and fraudulent tax returns are generally non-dischargeable.
Alimony and Child Support: Obligations for alimony and child support cannot be discharged in bankruptcy. These are considered essential to the well-being of the dependent parties and must be paid in full.
Debts from Fraud or Malicious Acts: Debts arising from fraudulent activities, embezzlement, or malicious acts are also non-dischargeable. Courts tend to hold individuals accountable for debts incurred through dishonest or harmful behavior.
Secured Debts Not Covered by Exemptions: Secured debts (such as a mortgage or car loan) are tied to specific property. If you want to keep the property, you’ll need to continue making payments, or the creditor has the right to repossess the asset. If the debt exceeds the property’s value, the unsecured portion may be discharged, but the secured portion remains.
Why You Need a Debt Attorney in Tampa, FL
Navigating bankruptcy can be overwhelming without proper legal guidance. Each case is unique, and understanding the nuances of which debts can be discharged requires expertise. A skilled debt attorney in Tampa, FL, can assess your financial situation, advise you on the best course of action, and help you determine which debts may be dischargeable under your specific circumstances.
Filing for bankruptcy is a significant decision that can have long-lasting effects on your financial future. While it offers a path to relief by discharging certain debts, it’s important to be aware of the limitations. Not all debts can be wiped away, and understanding the distinctions can help you make informed decisions. If you’re considering bankruptcy, contacting a debt attorney in Tampa, FL, can provide the guidance and support you need to achieve financial stability.
