Dealing with an overwhelming amount of debt can feel like a never-ending maze. At Westgate Law, we often encounter clients submerged in various types of debts and wondering if bankruptcy could be a lifeline.
Robert, one of our readers, shares his concern with us:
“I have debt in the form of credit cards, material to suppliers, a car wreck (I was not insured, and it was my fault), and a truck repo. Most of these creditors have judgments against me. I am so far under water I cannot possibly make good on these debt. Can filing bankruptcy eliminate these debts?”
If you are in a similar situation, it is crucial to understand which debts bankruptcy can eliminate and which ones it cannot. Let us explore each type of debt, along with other common debts often targeted for elimination. For more specific guidance, consulting with an experienced bankruptcy attorney is advisable.
Defining Bankruptcy
Bankruptcy, a legal process for debt relief, includes Chapter 7 (asset liquidation) and Chapter 13 (repayment plans). It halts most collections, impacts credit scores significantly, and does not cover certain debts like student loans. The process involves court petitions, credit counseling, and a trustee’s supervision. It is complicated, the laws vary by state, and it carries ethical considerations, often necessitating legal counsel. Let us briefly discuss how bankruptcy affects different debts:
· Credit Card and Unsecured Loans
These debts are the most commonly discharged in bankruptcy. However, you must be aware of excessive use right before filing for bankruptcy. Courts might take this as an indication that you never intended to pay and could challenge the discharge.
· Car Repossession
If your vehicle is repossessed and sold, the remaining balance, known as a deficiency balance, can often be wiped out in bankruptcy.
· Vehicle Accidents
Debts from vehicle accidents can generally be eliminated. However, debts arising from accidents involving a DUI or intentional harm may not be dischargeable.
· Debts to Suppliers
While debts to suppliers can be discharged, it is essential to consider the impact on small or mid-sized businesses. Ethics should play a role in your decision. Our experts believe that discharging debts from large lenders like credit card and car companies has minimal impact on them, but it can significantly affect smaller businesses.
· Medical Bills
Hospital stays, doctor visits and ambulance services are usually dischargeable. However, a bankruptcy might not cover new medical debts incurred after filing.
· Lawsuits and Judgments
Most lawsuits and resulting judgments can be eliminated. However, debts arising from criminal acts or penalties and fines are generally not dischargeable.
· Evictions
Bankruptcy can often eliminate unpaid rent from past evictions. However, bankruptcy does not automatically stop a current eviction. Landlords would still pursue eviction if you violate lease terms after filing.
· Utility Bills
These can typically be discharged, but restarting services might require a substantial deposit, as you will be viewed as a higher credit risk post-bankruptcy.
· Foreclosed Homes
If a balance is left after the sale of a foreclosed home, it can usually be eliminated in bankruptcy. However, the discharge will not necessarily prevent the foreclosure process if it has already begun.
The Final Say
Each bankruptcy case is unique, so it is vital to consult with a professional to understand your specific situation. At Westgate Law, we are committed to guiding you through this complex process with compassion and expertise. We can offer personalized guidance to help you make informed decisions if you are grappling with debt and considering bankruptcy. Call us at 800-891-1995 to schedule your appointment today.