It’s common knowledge that filing for bankruptcy wipes out most of your existing debts. The proper term for that is debt discharge. When a bankruptcy court discharges your debt, it effectively cancels the legal obligation you had to repay the creditor.
The whole idea behind discharging debt after filing for bankruptcy is to give you a lifeline to organize yourself without financial liabilities weighing you down. Here is more on dischargeable debts in a Chapter 7 bankruptcy.
What debts are discharged?
While the list below is not exhaustive, some of the unsecured debt that Chapter 7 bankruptcy will discharge include:
- Credit card debt
- Medical bills
- Unsecured personal loans
It is important to note that not that some unsecured debts are not dischargeable through a Chapter 7 bankruptcy. They include debts like child support, alimony, student loans, and debts incurred through fraud or criminal activity. You are still legally required to repay such debts
For a secured debt that has been discharged, you could lose the collateral used to secure the debt unless you recommit to the terms of the loan, pay it off in full, or agree with the creditor on a repayment plan.
Make the most of your bankruptcy filing
If you are planning on filing for bankruptcy, it is necessary to understand how everything works before making up your mind. It will help you avoid common mistakes people make that come back to haunt them in the future.
Having all the information you need can help you protect your interests when filing for bankruptcy.