It is true that the United States is seeing a large spike in bankruptcy filing documents. Many are looking for chapter 7 bankruptcy protection since they are so far in debt, they would not be able to solve their situation without filing for bankruptcy. While most people have a vague notion of what bankruptcy filing entails, unless they have professional experience with bankruptcy law, there are likely many areas in which they are in the proverbial dark on. One such area would be the answer to questions regarding what type of debts are discharged during a bankruptcy filing.
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This is not a question that should ever go unanswered. Unless you have a clear idea regarding which debts can or cannot discharged, then you really cannot approach your bankruptcy filing in the appropriate manner.
In general, all unsecured debt can be discharged during a bankruptcy filing. Secured debt, however, cannot be discharged in a bankruptcy unless the collateral has been surrendered. If this is the case, then the debt that remains after the creditor sells off the surrendered collateral, falls under the category of unsecured debt. At this point, the remaining debt can be considered unsecured and can be discharged via bankruptcy. However, if you have signed onto what is called a "reaffirmation agreement," which refers to your agreement to repay your debt, you would not be able to have the debt discharged.
There will be other instances where debt cannot be discharged. For example, any debts that are the result of fraud will not be able to be discharged. Those that have incurred debt via property settlements in the aftermath of a divorce or legal separation will not be able to receive a discharge. The same can be said of any spousal or child support in the aftermath of a divorce.
Debts to the government are a special case. Fines to the government cannot be discharged. Student loans can be discharged if the loans are causing a massive financial hardship. Taxes are generally not able to be discharged but there are instances where personal income tax might possibly be discharged but there is no guarantee this will occur. A common error in judgment that people make is they assume it will be easy to have their tax debt dismissed. They will assume this because there is precedent for discharging tax debt this means a bankruptcy court will automatically rule in their favor. This is assuredly not a given and no judgment with the filing of chapter 7 bankruptcy can ever be assumed to be guaranteed.
This is why it may be best to hire the best legal representation available to you when you make a bankruptcy filing. A qualified bankruptcy attorney may be able to get certain debts discharged that a judge might not initially be inclined to dismiss.
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