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The Importance of Understanding Debt Discharge

Finding out what debts bankruptcy can discharge is vital when deciding whether to file bankruptcy. Also, if bankruptcy is the right financial remedy for you, realize that some bankruptcy chapters do not discharge certain debts. A bankruptcy lawyer can help you evaluate debt and determine which bankruptcy chapter is appropriate.

More debts are dischargeable in a Chapter 13 bankruptcy than in a Chapter 7. And some types of debts are not dischargeable in either form of bankruptcy.

U.S. Bankruptcy Code limits discharge

U.S. Code Section 523 (a) (http://www.law.cornell.edu/uscode/text/11/523) lists 19 categories of debt that are not dischargeable under various bankruptcy chapters.

While you should always consult a bankruptcy lawyer, some debts that bankruptcy usually discharges include:

  • Credit card debt
  • Medical bills
  • Unsecured loans
  • Past due utility bills
  • Business debts
  • Bad checks (unless fraudulent)
  • Past due rent
  • Social Security overpayments (unless caused by fraud)
  • Revolving charge accounts
  • Old tax debts exceeding a certain number of years

Common debts that do not receive discharge are child support, alimony, recent income tax debt, and most student loans.

Do not underestimate the value of consulting an experienced bankruptcy attorney. For example, let’s say that your most pressing debt burden is a federal student loan that enabled you to get a college degree.  Bankruptcy discharges this debt only in limited circumstances, where severe, undue hardship prevents you from using your education in a purposeful way.  A bankruptcy lawyer can advise you about the likelihood of such debt being discharged. A lawyer’s advice is crucial before filing bankruptcy. Otherwise, if the student loan was your main reason for insolvency and bankruptcy did not discharge the debt, you would experience all the detriments of bankruptcy and none of the benefits.

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