Helping With Your Financial Future

Why filing for bankruptcy does not erase all your debts

On Behalf of | Jun 17, 2024 | Chapter 7 Bankruptcy

You may think that filing for bankruptcy will eliminate all your existing debts. However, it’s not necessarily the case. While bankruptcy can offer a fresh financial start, it does not erase all your financial obligations. You may be left with certain debts after the bankruptcy process is complete.

Understanding the debts that can be discharged or erased through bankruptcy can help you plan for the future, set realistic expectations and make the most of the bankruptcy process. Debts like past-due utility bills, medical debt, unpaid rent and credit card debt are some of the debts that can be discharged after filing for bankruptcy.

Common examples of non-dischargeable debts

Non-dischargeable debts are unaffected by bankruptcy and cannot be wiped out. As such, you will remain responsible for them post-bankruptcy. They include:

  • Alimony and child support obligations
  • Certain taxes, like recent tax debts
  • Debts from fraudulent or criminal activity
  • Debts arising from personal injury or death caused by intoxicated driving
  • Student loans, unless you can prove that repaying them would cause undue hardship

It’s also worth noting that while bankruptcy can discharge your obligation to pay secured debts tied to specific assets like mortgages and car loans, the lender’s right to recover the property remains enforceable. As such, creditors can still foreclose on your home or repossess your car if you do not keep up with payments.

Make informed decisions if you are contemplating bankruptcy

In essence, bankruptcy should ease your financial burdens. You do not want to find yourself overwhelmed by debt even after going through bankruptcy. It underscores the need for careful planning and a clear understanding of dischargeable and non-dischargeable debts. 

Reaching out for legal guidance can help you confidently navigate the bankruptcy process and lay a solid foundation for your future financial stability.