When a debt is legally discharged, you are no longer required to make any additional payments, and the lender is prohibited from making any further collection efforts. Both Chapter 7 and Chapter 13, the two types of consumer bankruptcy, have discharge provisions. But, not all types of debts can be discharged, and there are some considerations that anyone thinking about bankruptcy should take into account.
Discharge Exceptions
In a Chapter 7 proceeding, your assets that cannot be exempted will be liquidated (sold off) and most types of debt will be quickly discharged within a matter of months. A Chapter 13 case, on the other hand, allows you to retain all of your assets by creating a 3 to 5 year repayment plan; after the successful completion of the plan, most unsecured debts will be discharged (a home mortgage is a significant exception).
So what kinds of obligations cannot be eliminated through bankruptcy? The debts that can be purged though Chapter 7 vary somewhat from those affected by Chapter 13, but some examples of generally non-dischargeable debts include student loans, tax or fine money owed the government, child support or alimony, and debts arising out of personal injury caused by drunk driving.
Remember, even if a debt may be discharged through bankruptcy, a cosigner's obligation is not discharged (although Chapter 13 bankruptcy has special provisions that may protect cosigners in the case of consumer debts). In addition, any property subject to a lien may be seized by your creditor if you do not repay the loan in full, irrespective of eventual discharges.
Contact an Attorney
Only an experienced bankruptcy attorney can assess your debt load and determine which of your individual obligations may be eligible for discharge. If you feel overwhelmed by debt, contact an attorney today to explore your options.
