I'm Considering Bankruptcy, Will It Get Rid of All My Debt?
Seeking bankruptcy as a solution to your financial crisis? It’s common to wonder if ALL your debt can be disposed of with bankruptcy filing. The answer is, “it depends.” The truth is that bankruptcy can usually wipe out or reduce your “dischargeable” debts, but not ALL debts. The type of debt you have and the type of bankruptcy you are filing will have a big impact on the process.
Simply put, not all debts are dischargeable (meaning that the debtor is no longer required to repay) through bankruptcy. What types of debts can be discharged through bankruptcy? Unsecured debts such as credit cards, collection accounts, personal loans or medical bills are usually dischargeable. Secured debt such as a mortgage is typically not discharged through a bankruptcy and must be repaid if the property is not being surrendered (as in a foreclosure).
The third type of debt called “priority debt” also exists in most bankruptcy filings. A priority debt is usually a form of unsecured debt, but has been classified as a higher priority in terms of repayment under federal law and can be more difficult to discharge in the bankruptcy process. Examples of priority debt include alimony, child support payments, taxes, student loans and fees associated with the bankruptcy filings.
All of these types of debt are typically given high priority in the repayment process. Depending on the type of priority debt and the type of bankruptcy filing, the repayment of these items can range from fully dischargeable to requirements that they are paid in full.
A bankruptcy professional should be able to look at the specifics of your financial situation and the types of debt you are dealing with and recommend the best course of action for you, including bankruptcy counseling. For more information about the discharge process in bankruptcy filing visit the Federal Courts Bankruptcy page.