Know Which Debts a Court may Free You from if You File Bankruptcy

Those with huge debts and are unable to pay will probably go through a nerve-racking experience due to the constant hounding of creditors or debt-collectors, who will not cease their harassing tactics until debtors finally pay what they owe.

Loss of job, an unexpected health problem that requires costly medical treatment, reduced income, divorce, and/or a natural calamity are some of the reasons why people sudden lose the ability to pay creditors their mortgage, car loan, credit card debt, utility bills and other debts. Well, the more payments missed, of course, only results to the amount of the debt increasing until it reaches a sum that is already impossible (for the debtor) to settle.

Will a debtor still be able to save himself/herself from his/her seemingly impossible-to-pay or overwhelming debts? A “No” will definitely be devastating; fortunately,the answer is “Yes,” and the means is a legal one even – Bankruptcy.

In 2010, there were about 1.53 million Americans who filed bankruptcy in various U.S. federal bankruptcy courts. Bankruptcy is a legal procedure wherein a person (or a business firm) declares inability to make further payments in settlement of his or her debts. It is allowed by the law to give people (and firms) a fresh start in their financial lives.

In every financial situation is a bankruptcy chapter that would serve as an appropriate solution. Chapter 7 Bankruptcy or liquidation bankruptcy, for instance, is one that requires a debtor to surrender to a court-appointed trustee his/her “non-exempt” assets and properties for liquidation. One task of the trustee is to sell these properties in order to raise the amount needed to pay off a borrower’s creditors. Payment will only be on debts that are non- dischargeable (debts that a debtor will still need to pay), which include, but are not limited to:

  • Unlisted debts and creditors;
  • Most student loans, unless paying these would cause “undue hardship” to the borrower and/or his/her dependents;
  • Federal, state, and local taxes which are no more than three years old from the time these first became due;
  • Court fees;
  • Government-imposed penalties, fines, and restitution;
  • Child support and alimony or spousal support; and,
  • Debts resulting from wrongful death or personal injury damages if these are consequences of DUI.

According to Raleigh bankruptcy lawyers of the Bradford Law Offices, PLLC, dischargeable debts are debts a person is no longer responsible for paying after filing for bankruptcy. These include personal loans, credit card loans, medical bills, past utility bills, debts related to your business, payments on motor vehicles, house payments etc.; the court where bankruptcy is filed can free a debtor from these debts.

For “non-exempt,” some of the assets and properties that the law has identified under this classification include:

  • Motor vehicles, jewelry and tools used by the debtor in his or her trade or profession – but only up to a certain value;
  • Reasonably necessary household furnishings and goods, and clothing;
  • Household appliances;
  • Pensions, unemployment compensation, social security benefits and a certain percentage of the borrower’s still unpaid but earned wages; and,
  • Compensation for personal injury.