Debts and Chapter 7 discharges

Chapter 7 bankruptcy might be the preferable option for those who pass the requisite means test. Under Chapter 7 rules, particularly unsecured debts may face discharge, indicating the debtor no longer must pay the debts. However, not all debts face dismissal, and some obligations remain.

Understanding Chapter 7

Numerous debtors find Chapter 7 provides an acceptable agreement. Certain assets may be liquidated to pay creditors, and unsecured debt, such as credit card balances, could be discharged entirely, freeing the debtor from any obligations. The court will look to make sure that the account holder did not run up charges in an attempt to defraud the bankruptcy court.

Many filers do not realize that certain debts do not go away. The law stipulates that the debtor must still make their payments. Hopefully, the discharged debt and previous liquidation could lead to someone being on a better financial footing and capable of paying the remaining obligations.

Debts that remain

Chapter 7 filers cannot expect to receive a discharge from debts they never listed. Anyone committing fraud won’t likely find a reprieve from related obligations in a federal courtroom. Taxes from federal, state, and local sources may not be dischargeable if they are recent. Alimony and child support are ineligible; the same applies to fines levied by government agencies. Persons facing judgments from drunk driving-related personal injury lawsuits cannot seek a discharge from the payment requirements.

Persons weighing their options to file for Chapter 7 bankruptcy could review debts the courts won’t discharge. Doing so might move the debtor to consider other options, such as filing for Chapter 13.

Some might wonder about student loan balances. These loans could be discharged if the debtor proves repayment causes undue hardship.