Assessing Your Bankruptcy Debt

Assessing Your Bankruptcy Debt

In a bankruptcy, debts are first divided into two types—dischargeable and nondischargeable. A dischargeable debt is one that the bankruptcy laws allow you to discharge, or cancel. The best examples of dischargeable debts are the money you owe on credit cards, such as a Visa, MasterCard, or department store cards, and medical bills. Most consumer debts are dischargeable in bankruptcy, and these are the types of debts that lead most people into a situation that requires them to file for bankruptcy. If you have several credit cards and you charge them all up to the limit, it is easy to get in over your head.

A nondischargeable debt is one that you will still owe after the bankruptcy is completed. Examples of nondischargeable debts are:

  • student loans
  • child support
  • spousal support
  • delinquent taxes
  • some court-ordered judgments
  • debts arising from fraud (such as providing false credit application information or obtaining credit with the intention of filing for bankruptcy to avoid payment)

Debts are also divided into two other categories—secured and unsecured. A secured debt is one that can be viewed as attached to a particular piece of property. The property that secures the debt can be taken by the creditor to pay the debt. The prime example of a secured debt is a mortgage. The mortgage means that if you do not pay the money you borrowed to buy your house, the lender can take your house. Most car loans also include a financing statement, which is essentially the same as a mortgage. If you do not pay, the lender gets your car.

An unsecured debt is not tied to any particular piece of property. Most credit card loans are unsecured. If you do not pay, the bank cannot seize any particular piece of property (at least, not without suing you and trying to attach your property later to satisfy the debt).

  • Introduction to Bankruptcy
    Do you need a fresh financial start? Are you being hounded by debt collectors? You are not alone. Almost 1.5 million individuals file personal bankruptcies every year in the U.S. It has been a long-standing element of American law that an individual can file for bankruptcy and obtain a fresh start...
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  • Types of Bankruptcy
    For individuals, there are two basic types of bankruptcies : chapter 7 and chapter 13. An individual may file for bankruptcy under Chapter 7, which is sometimes called "fresh start" or a "liquidation" bankruptcy. In a Chapter 7 bankruptcy, an individual may keep certain kinds of property (called "...
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  • Who Can File?
    Generally, anyone can file for bankruptcy. However, not everyone qualifies to file for a particular kind of bankruptcy. If you are an honest person who can't afford to pay your bills, you can qualify for bankruptcy. If you have previously filed for bankruptcy, it may affect your options. For...
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  • The Process
    There are eight common elements in obtaining a bankruptcy discharge (i.e., eliminating or reducing your debts, or planning their repayment), although the details of these may vary depending on your situation. The attorney you find through LegalZoom will help you with the entire process which takes...
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  • Pre-Bankruptcy Credit Counseling
    Before you can file for bankruptcy, you must first consult a nonprofit credit counseling agency approved by the United States Trustee's Office. This consultation may show you if there are alternatives bankruptcy that would work for you.
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  • Bankruptcy Reform
    Congress changed the bankruptcy laws significantly in 2005, making it more difficult for individuals to file for bankruptcy. However, bankruptcy relief remains available to those who qualify. Some important elements to the revised bankruptcy laws are:
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