Which debts are dischargeable in Chapter 7 bankruptcy?
Filing for bankruptcy is a big decision. I understand how difficult it can be to make such a life-changing choice as you research ways to gain financial freedom. There is a lot of information on the internet about Chapter 7 bankruptcy. But, it can be difficult to decipher what is truth, and what is fiction. I want to help. I have a passion for helping people gain control of their finances in Littleton, Aurora, and Centennial. One question I am asked often is: “How do I know which debts are discharged in Chapter 7 bankruptcy?” Here is my guide:
What is Discharged in Chapter 7 Bankruptcy?
Debts which are called “unsecured debt” are dischargeable in Chapter 7 bankruptcy. These are also commonly called consumer debt. Examples include:
- Credit Card Debt
- Medical Bills
- Utility Bills
- Personal Loans
- Back Rent (you could still be evicted if you aren’t current)
- Government Benefit Payments
- Money Judgments (there are a few exceptions)
Exceptions to Unsecured Debts
There are exceptions to the discharge of these debts. If the money, services, or property was obtained under false pretenses, it cannot be discharged. This “false pretense” must have been made in writing to the creditor – and it must have been the deciding factor in the creditor extending credit. An example of this would be lying about your income on a loan application. This falsehood would be material if you had to meet a minimum income to qualify for the loan. If you would have qualified without the falsehood, it is not material.
Secured Debts Which are Dischargeable:
– If You Surrender Property
Secured debt can also be discharged in Chapter 7 bankruptcy. But, this is only if you return (surrender) the property securing the debt to the creditor. This can be a good thing if you don’t need the secured property in Greenwood Village, Highlands Ranch, or Parker. In some cases, it can give you a better fresh start if you surrender property which has been weighing you down. In order to surrender property, you will need to indicate this intent on a form called the “Statement of Intentions.” An experienced bankruptcy attorney can guide you through this process.
– If the Creditor Didn’t Take a Proper Security Interest in the Property
If a creditor fails to correctly take a security interest in your property, you may be able to discharge a secured loan. For example, if your car is within the exemption for motor vehicles and the creditor forgets to place a lien on it – making their claim unsecured. You may be able to keep your car because it is an exempt property / asset in this case.
Debts Incurred Close to Your Filing are Dangerous
Some debts are unable to be discharged, even if they originally would have been liquidated, if they were acquired close to the time you filed for bankruptcy in Lone Tree, Englewood, and Aurora. These are debts for luxury goods (if they are more than a set amount) and cash advances (if they are more than a set amount or within a set time before filing for bankruptcy). The reason these debts aren’t considered dischargeable is because it is assumed you incurred them with no intent to repay, because you knew you were going to file for bankruptcy.
Other Dischargeable Debts in Chapter 7 Bankruptcy
In some cases, income tax can be dischargeable in bankruptcy. If you are considering filing for bankruptcy, don’t hesitate to contact an experienced bankruptcy attorney who can help you get the best fresh start possible on taxes and other types of debt.
The bankruptcy code is confusing and complex. If you have questions about which debts are discharged in Chapter 7 bankruptcy, don’t hesitate to contact experienced bankruptcy attorney Barry Arrington, who has successfully helped hundreds of families overcome the difficulties of filing for bankruptcy in the Denver area. Contact an experienced bankruptcy lawyer at 303-205-7870 (or submit the “Get Help Now” form) for answers to more specific questions.