Many people who file Chapter 7 bankruptcy enter into the process because their debt will be discharged if their petition is approved. For many debtors, Chapter 7 is preferred over Chapter 13, as in a Chapter 13 a portion of debt must be paid back, while s Chapter 7 gives those in financial trouble a new start by forgiving debt. However, that new start does not include the discharge of all debt. There are various types of financial obligations that are not forgiven under Chapter 7.
What is Discharged
Generally, unsecured debt, that is debt that accumulated without a promise of collateral to the creditor from the debtor, is discharged under Chapter 7. The most common type of unsecured debt that is forgiven is credit card. Medical bills are the other kind that is discharged.
Types of Non-Dischargeable Debt
There are various kinds of debt that will not be discharged under Chapter 7. That means that the debtor must either pay the debt or, if collateral is involved, they must give that to the debtor in lieu of payment. Another manner in which non-dischargeable debt may be collected is through the garnishing of one’s wages. When wages are garnished, a fixed amount is automatically taken from the debtor’s weekly or biweekly income, and it is paid to the creditor.
Do you know what kinds of debt are not discharged under Chapter 7? Here are three types of debt that one must pay despite being awarded Chapter 7 bankruptcy.
Secured loans are defined as those that are given with the promise of collateral. The collateral is what the creditor receives if the debtor cannot meet their financial obligations. The two most common types of secured loans are those taken on a home and a motor vehicle. In both instances the item for which the consumer has taken the loan acts as collateral. Thus, if someone cannot pay their mortgage or car loan, the company that issued the home or car loan may take possession of the item used as collateral.
Most taxes, including federal, state, local, and property, must be paid even if the court approves one’s Chapter 7 bankruptcy. In the case of taxes, one’s income may be garnished or assets may be taken and auctioned, with the proceeds being used to pay the tax bill. If local property taxes go unpaid, then the entity that’s owed the money may place a lien on the home, and they may eventually take possession of it with the person who eventually pays the property taxes becoming the new owner of the home. There are certain instances when income taxes due may be discharged, so you will want to discuss with an experienced bankruptcy attorney.
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Student Loans and Child Support
Recently a woman in Erie, Pennsylvania, petitioned the court in her bankruptcy proceeding to discharge her student loan. However, such loans are not dischargeable except in extreme circumstances. Thus, there’s little chance that one will be granted an exception to this rule. Also, back child support is not forgiven when one is granted Chapter 7 bankruptcy. As it is with personal tax bills, wages may be garnished if back child support is not paid.
Get West Palm Beach Bankruptcy Help Now
If you are going to file for bankruptcy and want to make sure that you adhere to all rules and regulations regarding such and would like to ensure that your rights are protected, contact Florida bankruptcy attorneys at The Law Office of Kelley & Fulton today at 561-491-1200. We will work with you throughout the bankruptcy process, providing you with personalized service, solid advice, and timely communication.