Five Dischargeable Debts in a Chapter 7

Many area families live from hand to mouth. In fact, many families do not have enough cash to cover a $400 emergency expense. Frequently, when financial trials hit, people slowly fall behind on unsecured debt payments. The past due balance quickly builds up, and most creditors are not very patient.

Bankruptcy may be a good option in these cases. Generally, if a family owes more than about $10,000 in unsecured debt, bankruptcy may be a good idea. Debts of this size are very difficult to pay off. In less than a year, Chapter 7 could give you and your family the fresh start you deserve.

Credit Cards

The average credit card interest rate is over 19 percent. At that level, it does not take long for an unpaid balance to spiral out of control. Credit card debt is perhaps the most crippling kind of unsecured debt. It is also the easiest kind of debt to discharge in a Chapter 7.

Normally, an attorney accesses a credit report and transfers that information to the bankruptcy paperwork. This part of the process is relatively fast and error-free.

Sending notice to debt buyers is a bit more time-consuming. Harassing debt buyers often do not appear on credit scores. Even if they do have an official capacity, it is not easy to tie a debt buyer to a specific account. But this meticulous process is critical. If the debtor does not give complete notice, some debt buyers may be free to continue their harassment.

Medical Bills

Few people with multiple credit card accounts want to keep all of them active. Medical bills, however, are different. Generally, all medical bills are unsecured, so they are all dischargeable in bankruptcy. But that may not be what the debtor wants or needs.

Typically, doctors stop seeing patients who owe money, whether they filed bankruptcy or not. To stay in a physician’s good graces, many debtors voluntarily reaffirm at least some medical bill debt. As a result, they repay the obligations on their terms, and not on the terms the moneylender demands.

Payday Loans

Much like credit cards, payday loans are an excellent source of short-term cash. But once people get on the payday loan treadmill, it is difficult to get off. Think of bankruptcy as the emergency stop button.

Contrary to popular myth, payday loans, auto title loans, and other such loans are unsecured obligations. The debtor simply made a written promise to pay. Generally, the Automatic Stay prevents these companies from pulling money out for debt payments. However, to be on the safe side, we typically recommend that bankruptcy debtors close their current accounts. Talk to an attorney before you take any such action.

Student Loans

In Illinois and Indiana, student loans are difficult to discharge. These jurisdictions adhere to the Brunner rule. This doctrine only permits student loan discharge if the debtor has a disability or another serious hardship.

That being said, the success rate in this area is actually quite high. Most people who ask for relief obtain at least a partial discharge. A skilled attorney just needs to know how to present the request.

Income Taxes

Likewise, past-due income taxes are only dischargeable in certain situations. Generally, the debt must be at least three years old and the returns must have been on file for at least two years. There might be other qualifications as well.

If your income tax debt is not dischargeable, alternative relief may be available. For example, in a Partial Payment Installment Agreement, the IRS agrees to waive some of the amount and accept monthly payment on the balance.

Count on Tenacious Lawyers

Considerable Chapter 7 relief is available, if a skilled attorney is behind the wheel. For a free consultation with an experienced Chicago Chapter 7 bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html

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