What Debts Can Be Included in a Bankruptcy?
Bankruptcy is designed to help people who are struggling with a debt burden they cannot pay get out of debt and get a fresh start. Most types of debts may be included in bankruptcy. The type of debts that may be included in bankruptcy is the same no matter if you are filing Chapter 7 or Chapter 13 bankruptcy. A bankruptcy attorney should be used to ensure all eligible debts are included in the bankruptcy.
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Secured Debts
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Secured debts, such as vehicle and house loans, may be included in bankruptcy. These types of loans are backed by the value of the loan. Therefore, lenders may proceed with foreclosure proceedings if individuals stop making payments on the property. The bankruptcy process will halt foreclosure proceedings initially, until the Chapter 7 discharge or a repayment plan can be in place. Lenders will work with individuals to keep real estate out of bankruptcy as much as possible, in most cases.
Credit Cards
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Credit card debt may be included in bankruptcy. Most types of credit card debt is unsecured. Lenders may dispute the bankruptcy claim. In some cases, the lender can repossess any significant assets purchased with the debt during bankruptcy. This may include repossessing jewelry, electronics or other valuable items. Credit card debt is one of the most common types of debt included in bankruptcy.
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Medical Debts
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Medical and dental debts may be included in bankruptcy. Individuals often file bankruptcy due to life-threatening illnesses or accidents where significant medical debt occurs. Professional service providers, hospitals, medical offices and third party services may be included. Each individual debt must have a listing on the bankruptcy documentation to ensure it has the proper discharge.
Non-Dischargable Debts
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Some debts may not be included in Chapter 7 bankruptcy. This includes criminal fines and fees, student loan debt, tax debt, fraudulent debts, alimony and child-support payments. In addition, any debts incurred in order to pay off non-dischargable debts may not be included in bankruptcy, such as a loan to pay off taxes. These debts must have payment in full.
Chapter 13 Debts
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Unlike Chapter 7 bankruptcy, many of the above mentioned debts can be included in Chapter 13 bankruptcy, which is reorganization of debt. It is important to note that these otherwise non-dischargable debts will receive repayment in full through Chapter 13 bankruptcy. Comparatively, some unsecured debts may have a reduction through the reorganization of debts for those who file Chapter 13 bankruptcy. Attorneys can help people set up repayment of these debts in an appropriate manner through the Chapter 13 reorganization.
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