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Chapter 7: Say Goodbye To (Almost) All Your Debt

24 March 2022

Gabriel Freeman

When you file chapter 7 bankruptcy, you are choosing to use a generally efficient and quick manner of ridding yourself of debt. Almost all types of debts can be forgiven with chapter 7, however, all filers should understand that it has its limits. Read on for a quick summary of what you can expect with chapter 7 debt discharges and what may not be discharged.

What Can be Discharged

The most common forms of consumer debts can virtually disappear nearly overnight with a chapter 7 filing. Many people have far too much credit card debt, for instance, and that debt is often discharged at 100%. Then, you might be saddled with medical debt. It's expensive to get sick or hurt, and medical collections are usually unrelenting. All medical debt should disappear with a chapter 7 filing. Finally, you can rid yourself of any personal loan debt, payday loan debt, and some older tax debts. Now on to what may not be as easily discharged.

These Debts May Not be Discharged

1. Student loan debt – Many former students struggle with this debt, but it can be difficult to have it forgiven. If you qualify, you might get your loans forgiven but the circumstances are strict.
2. Taxes – If your tax debt is older, you might get some relief. Debts from more recent returns, however, will still be owed after your chapter 7 is processed. Also, you might lose your tax refund if you are expecting one soon. Speak to your bankruptcy lawyer to find out more about how much of your tax debt can and cannot be forgiven.
3. Back child support – Under no circumstances will any back child support debts be forgiven with chapter 7. In some instances, you might be able to have spousal support included in the filing but that varies by state.
4. Legal obligations – If you owe money to creditors and they took you to court before you filed bankruptcy, that debt goes away with chapter 7. However, if you have other legal debts unrelated to your finances, they may not be included. For example, if you owe the court fines for a criminal matter, you still must pay that.

While it's important for filers to take what cannot be discharged into consideration, it's also important to understand that any debt that goes away frees up more funds to pay off the things that cannot be included. To find out more, speak to a bankruptcy law attorney.

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