If you are like many in Pennsylvania and across the country, unprecedented world events have left you facing possibilities you never imagined, and it can be very frightening. Fortunately, you may be among those who qualify for Chapter 7 bankruptcy, which can bring an end to many of the painful consequences of overwhelming debt.
Perhaps you have lost your job, your business closed or you are among those who suffered a long-term illness that left you unable to work and facing many medical bills. You may have creditors calling, demanding payment and threatening to take your home or your vehicle. Chapter 7 offers debt relief by seeking the cancellation of your unsecured debts, such as credit cards and medical bills. However, there are some important facts to understand about Chapter 7 before you file.
What will remain?
It may sound like a dream to have all your debts wiped away, and in some cases, you may avoid the liquidation of many of your essential assets. However, not every debt is eligible for discharge through Chapter 7. For example, the following usually remain after the cancelling of the rest of your debts:
- Overdue child and spousal support payments
- Any income tax or Social Security taxes you owe from the past three years, including penalties that have accrued
- The loan on a vehicle you intend to withhold from asset liquidation during the bankruptcy process
- The mortgage on your home if you intend to continue living there
- Credit card debt you charged just prior to filing for bankruptcy
- Any debt you owe that is related to conviction for financial crimes or a personal injury judgment against you, following a drunk driving conviction
- Any federal student loans, under most conditions
You may be able to claim an undue hardship to obtain a discharge of your student loans, but this is not easy to do. First, you must demonstrate that you have tried in good faith to repay the loan but that your situation prevents you from continuing to make payments.
While this may seem like a long list of exceptions to Chapter 7 bankruptcy discharge, the process often provides enough relief from the other debts that consumers are in a much better position to repay the debts that remain. Further, for the best chances of a successful Chapter 7, it is often helpful to have the advocacy of a legal professional skilled in bankruptcy negotiations.