Which Debts are Discharged in Chapter 7 Bankruptcy?

Discover the path to financial freedom through Chapter 7 bankruptcy

Chapter 7, also known as liquidation bankruptcy, provides the opportunity to discharge certain debts, alleviating the burden and offering a chance for a fresh financial start. Understanding which debts are discharged in Chapter 7 bankruptcy is critical for anyone considering this legal pathway to financial freedom. 

Before filing for Chapter 7 bankruptcy, it would be wise to seek legal advice from our Paducah bankruptcy attorneys at Farmer & Wright, PLLC, to help you assess your unique financial situation, explain which debts can be discharged, and navigate the bankruptcy process to achieve the best possible outcome for your financial future.

This article will give you an overview of the types of debts that can typically be discharged in Chapter 7 bankruptcy. With this knowledge, you can make informed decisions and take the necessary steps to pursue a brighter financial future through Chapter 7 bankruptcy.

• Credit Card Debt
• Personal Loans
• Utility Bills
• Medical Bills
• Collection Accounts
• Past Due Rent
• Civil Judgments
• Business Debts

Credit Card Debt

Credit card debt arises when you use a credit card to make purchases or transactions but do not pay the full balance owed by the due date. It is a common form of unsecured debt, meaning it is not backed by any collateral. Instead, the credit card issuer extends a line of credit to the cardholder, allowing them to borrow money up to a certain limit.

In Chapter 7 bankruptcy, unsecured credit card debts are generally eligible for discharge, which relieves debtors of their obligation to repay those debts. That includes debts from regular credit cards, store cards, and other unsecured lines of credit.

Credit card debt can be a significant financial burden for individuals and families if not managed carefully. If credit card debt becomes overwhelming, seeking legal advice from our Paducah, KY, bankruptcy lawyer is essential to regain control of your finances.

Personal Loans

Personal loans are a type of unsecured loan that individuals can obtain from various financial institutions, such as banks, credit unions, or online lenders. Most unsecured personal loans, such as payday loans and other forms of consumer debt, can be discharged in Chapter 7 bankruptcy.

Utility Bills

Past-due utility bills are typically dischargeable in Chapter 7 bankruptcy. Utility bills refer to invoices or statements issued by service providers for essential services used by individuals or households. These bills usually include charges for various utility services necessary for day-to-day living. Common utility bills include:

• Electricity
• Water
• Gas
• Telephone and Internet
• Cable or satellite TV

Medical Debts

Medical debt refers to the outstanding expenses owed for medical services and treatments that a person or entity has incurred but cannot pay. Medical debt is considered unsecured debt because it is untied to any collateral, unlike secured debts such as a mortgage or car loan.

Medical debts can be discharged in Chapter 7 bankruptcy, providing relief to those who have accrued significant medical expenses. However, it’s essential to consult with our Paducah bankruptcy lawyer to understand the implications of bankruptcy on your particular medical debt and financial situation before making any decisions.

Collection Accounts

Debts that have been sold to collection agencies, also known as “charged-off” debts, are financial obligations initially owed to the original creditor but have been transferred or sold to third-party debt collection companies. Collection debts, including outstanding balances on charged-off accounts, can be discharged in Chapter 7 bankruptcy.

Past Due Rent

Past due rent refers to outstanding rent payments that a tenant owes to their landlord for a period already passed. When a tenant falls behind on rent and cannot catch up, the unpaid rent can be considered a debt. Debts related to unpaid rent and broken leases can be discharged in Chapter 7 bankruptcy.

While Chapter 7 bankruptcy can discharge past due rent, it may not eliminate the obligation to pay future rent if you choose to continue renting the property after the bankruptcy process. Bankruptcy does not release you from any rent payments due after the bankruptcy filing. Consulting with our Paducah, KY, bankruptcy attorney is crucial to ensure handling past due rent and other debts in your bankruptcy case.

Civil Judgments

The dischargeability of civil judgments in Chapter 7 bankruptcy depends on the nature of the judgment and the underlying debt. Some civil judgments can be discharged if they are related to dischargeable debts like credit card debt or personal loans.

Business Debts

Business debts are financial obligations incurred by a business entity, such as a company, corporation, partnership, or sole proprietorship. These debts are typically related to the business’s operations, expenses, and financing activities. This type of debt can be discharged under Chapter 7 bankruptcy for individual and business bankruptcies.

How a Paducah Bankruptcy Lawyer Can Help Determine Which Debts are Discharged in Chapter 7 Bankruptcy

Chapter 7 bankruptcy gives a chance to individuals and businesses to wipe the slate clean and start anew. It is an essential tool for those struggling with overwhelming debts and seeking a path toward financial relief. Filing for bankruptcy is a major life decision that can affect your financial and personal life for many years. Therefore, it’s important to understand what Chapter 7 can and cannot do for you. 

Chapter 7 bankruptcy can discharge most of your unsecured debts, but it does not discharge all types of debts. Some debts might appear straightforward, but they could have exceptions or specific conditions under bankruptcy law. Our Paducah bankruptcy attorneys at Farmer & Wright, PLLC, can properly classify each debt and determine its dischargeability status. We can assess your unique circumstances, determine which debts can be discharged, and help you make informed decisions about the bankruptcy process.

Our bankruptcy law firm will navigate the complexities of bankruptcy on your behalf, providing personalized advice tailored to your situation. We can strategize to minimize the impact of non-dischargeable debts on your financial situation. We know that every case is unique, and we’re here to guide you every step of the way. Contact us now to schedule a free consultation and learn how we can help rebuild your financial future.