Business

No, Chapter 7 Does Not Cover All Debt

Chapter 7 bankruptcy can help people eliminate debt including medical bills, personal loans, credit card debt and other debt,but there is some debt that is simply not covered in a Chapter 7 bankruptcy settlement. Here are some couple that may prevent debt from being discharged:

  1. Not following the procedures of the court for bankruptcy.

Debtors must follow the procedures of the court in order to have their debt discharged. Failing to do so can result in some, or even all debts not being discharged by the courts. Failing to adhere to the following can result in denial of discharge of debt:

  • Committing fraudulent acts or perjury
  • Trying to hide property or other assets to fraudulently not pay creditors
  • Not completing your financial management courses
  • Not providing tax documents
  • Hiding financial records
  • Not being able to account for lost assets

If the debtor has not followed procedures of bankruptcy, they will be responsible for all debts.

  • Having debt that does not qualify for discharge.

Some debts just do not qualify for discharge and they include the following:

  • Debts caused by committing criminal acts including fraud, larceny or embezzlement.
  • Debts caused from deliberately causing property or personal damage.
  • Debts caused within 60 days prior to filing bankruptcy by obtaining money or services under false pretenses including cash advances, credit card purchases for luxury items, property or professional services.
  • Alimony or other marital support payments.
  • Debt that is not included in your bankruptcy filing.
  • Student loans. (Student loans may be included in Chapter 7 bankruptcy, but your attorney will have to be able to show that paying these loans will cause you an undue hardship. This means you will need to prove that you cannot afford to pay the student loans now or in the future and this is not an easy task to prove to the court.)
  • Tax payments are not usually included in a bankruptcy, but your attorney may be able to assist with specific tax liabilities.

Filing for bankruptcy can be a great solution to stop phone calls, collection letters, lawsuits and wage garnishment for unpaid debts and it can help erase many debts that you may have. As you now know, there are some debts that cannot be included in a Chapter 7 bankruptcy, but you should be able to have your primary debts discharged if they are not included on the list of non-dischargeable debts.

Once you file for Chapter 7 bankruptcy, the courts will start an automatic stay which halts all collection efforts from all creditors. Some creditors may be able to request the courts to give them relief from the automatic stay so they can continue with their collection efforts, but this relief is not granted to all creditors and is usually only granted to those who have secured credit debt such as motor vehicle loan companies.

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