I’ll describe some debts that sometimes can be discharged in Chapter 7 bankruptcy below;
Tax Debt: Income tax returns that has been filed dutifully but have not been paid maybe done away with if they are more than 3 years old. So much more of the determinative process happens when it comes to analyzing whether or not a given tax debt can be fully discharged through a bankruptcy filing but it always starts and ends with timing.
Student Loan Debt: In order that your student loan debt be considered for discharge, you will have to demonstrate that paying the loan has put you through undue hardship. This was once very murky and a very hard standard to meet, however, in late 2022 the Department of Justice issued new guidance on undue hardship and made it possible to discharge federal student loans in bankruptcy.
It means that there is still need to file another adversary proceeding in order to assess whether one qualifies to be regarded as an undue hardship. As for the adversary proceeding which is regulated by the code of civilian procedure there is no court filing fee.
Debts Which Can Almost Always Be Dismissed in Chapter 7 Bankruptcy
In fact, a credit card company or a bank can request that the debt that is owing to them is not to be discharged. This can happen if the bank feels that the individual debtor provides wrong information as the credit application form. Sometimes, credit card companies object on the grounds that the filer never intended to repay the debt, and is abusing the bankruptcy system.
In other words, United States bankruptcy law provides as to who bears the evidential burden after the objection has been made, the individual debtor or the objecting creditor. This may be mitigated by stopping the use of credit cards once the decision to go for bankruptcy has been made. If you are unsure of how to chart your budget out of the monthly income only, then don’t worry because during the mandatory pre-bankruptcy credit counselling session you have got the right to ask the counsellor for an explanation. In some cases, it is a process as simple as ceasing to make the monthly payments on the debt. While that may bring a temporary hit in your credit rating, it is much worse to have an objection to your bankruptcy discharge.
Bankruptcy Saves an Individual from Creditors as Soon as the Application is Made
The moment you file for a bankruptcy petition with respect to any of the types of bankruptcy, the automatic stay relieves you. The automatic stay forbids debt collectors, banks, credit card companies and any other body you owe money from communicating with you or taking any more collection measures. It does not allow the creditors to regained whatever you owe them in any form, including through automatic wage deductions.
The only two forms of commitments that are not allowed to be included are domestic support obligations which are not permitted by the SCM, as well as back taxes. However, strictly speaking, their agreements will remain in force, if your child support payments are deducted from your wages, that will remain the case. If there are back taxes which you have left unpaid then the Internal Revenue Service has the right to take your tax refund of whatever amount for the payment of the overdue taxes after you have filed for bankruptcy. The automatic stay is generally an interim order. It does however cease once the bankruptcy court has granted a discharge.
Summarize
Again, most consumer debt is dischargeable in bankruptcy while most business debts cannot be discharged. Chapter 7 wipes out medical bills, personal loans, credit card, and most of other unsecured debts. Debt which is connected to some sort of ‘bad act’, such as causing someone physical harm or misrepresenting oneself on an application for credit cannot be erased. If tax liability can be erased through bankruptcy is a topic for debate, which depends on several factors, and is beyond the scope of experts, bankruptcy lawyers.
