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Can Bankruptcy Wipe Out All of My Debts?


If you are having trouble paying your bills, especially in the midst of the COVID-19 pandemic, you may be wondering if bankruptcy can help. Most individuals file for either Chapter 7 or Chapter 13 bankruptcy. In a Chapter 7 case, known as a liquidation, a judge will “discharge” your obligation to repay certain debts altogether. A Chapter 13 case, in contrast, involves submitting a repayment plan to the judge, which can let you spread out existing debts over a longer period of time.

Chapter 13 may be the better option if you still have a regular income and you have one or more significant debts that are deemed “non-dischargeable” in a Chapter 7 case. This is an important concept. Contrary to what you might think, not all debts can be discharged in bankruptcy. And other debts may be discharged in Chapter 13 but not Chapter 7.

What Debts Are Never Discharged in Bankruptcy?

Federal law declares certain types of debt as non-dischargeable, meaning you are still liable for them even after successfully completing bankruptcy. The most common types of non-dischargeable debts are child support and alimony payments ordered by a state court, as well as any criminal fines or penalties you may owe. Many tax-related debts are also non-dischargeable. And while many civil court judgments against you can be discharged, there are exceptions for debts arising from “willful and malicious” injuries, in addition to debts resulting from death or injury caused by drunk driving.

What Debts Can Be Discharged in Chapter 13 But Not Chapter 7?

There is another group of debts that you may be able to obtain a discharge for if you file for Chapter 13, but not Chapter 7. This includes marital debts other than support obligations, such as a property settlement arising from a divorce. A Chapter 13 case can also help you get rid of non-criminal government fines, any condominium or homeowners’ association fees incurred after you filed for Chapter 13, and certain debts you were unable to discharge in a prior bankruptcy case.

What Debts Are Difficult–But Not Impossible–to Discharge in Bankruptcy?

There is a third group of debts that present something of a gray area. These are debts that can technically be discharged in bankruptcy–but it won’t be easy. Student loans are perhaps the most prominent type of debt under this heading. Unlike most loans, federal law strongly favors protecting lenders, so you need to demonstrate that repaying your student loans would impose an “undue hardship” to obtain bankruptcy relief.

Get Help from a Southeast Iowa Bankruptcy Lawyer

You should never think of bankruptcy as a “get out of jail free” card. Nor should you be ashamed to consider bankruptcy as an option if you are simply unable to keep current with your creditors. An experienced Southeast Iowa bankruptcy attorney can assist you in reviewing your options and helping you to decide your best option moving forward. Contact the Noyes Law Office today to schedule a free, no-obligation consultation.


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