If you need help paying down existing debts, it may be a good idea to file for bankruptcy. However, not all debts are eligible to be discharged in a Chapter 7 proceeding. In some cases, it may be in your best interest to negotiate a payment plan with a California creditor as opposed to seeking to have a debt balance eliminated by a judge.
Tax and student loan debts are rarely discharged
Generally speaking, you won’t receive relief from income tax debts unless they are several years old. Furthermore, you will likely need to prove that being required to make student loan payments will result in a financial hardship before they are discharged by a bankruptcy judge.
Spousal and child support payments won’t be forgiven
Child support payments are designed to ensure that a minor receives the financial support that he or she is entitled to. As a general rule, these payments must be made unless an existing order is suspended or otherwise modified to account for your current financial situation. In addition, most courts view alimony payments as priority debts that must be repaid in full.
You might be able to keep property by reaffirming a debt
It may be possible to keep a car or home by assuring your creditors that you’ll keep making payments as agreed. However, a portion of the equity in your home might be used to pay off creditors in a Chapter 7 proceeding.
There may be many benefits for filing for Chapter 7 bankruptcy such as receiving an automatic stay of creditor collection activities. If you’re thinking about filing for bankruptcy, it may be a good idea to speak with an attorney. He or she may review your case and determine if your debts might be eligible for a full or partial discharge.