If you are thinking of filing for chapter 7 bankruptcy, knowing what it means for your finances is necessary. Usually, a bankruptcy discharge releases you from some of your financial liabilities, and as the debtor, you are no longer legally obligated to pay such debts. Most unsecured debts are discharged under chapter 7 bankruptcy.
Unsecured debts are those which are not backed by collateral. For instance, if the credit contract you signed did not state that the creditor can take the property purchased on credit upon default of payment, then that debt is not secured. In contrast, if you have a car payment or mortgage plan that allows the creditor to attach a lien to the house or car and sell it to pay your dues, then that is a secured debt which, in most instances, is not discharged under chapter 7 bankruptcy.
Examples of dischargeable debts
Secured or unsecured, it is important to note that not all debts are discharged, and some exceptions apply. Some of your debts that may be discharged include:
- Medical bills
- Business debts
- Utility bills due before declaration of bankruptcy
- Auto accident claims that do not involve drunk driving
- Dishonored checks that are not based on fraud
- Monies owed under lease agreements, among others.
Other debts like student loans, alimony, child support, and the debts that you did not list in your bankruptcy filing cannot be discharged.
Understand your obligations before filing for bankruptcy
Before taking the big leap in filing for bankruptcy, it is necessary to understand the implications of your financial obligations fully. Making the right decision entails learning more about bankruptcy laws that will affect your finances. Finally, just because you filed for bankruptcy does not mean that you do not have rights to protect.