What Debts Can Be Discharged in Bankruptcy?
Bankruptcy is an important tool that can allow you to get your financial house in order, but there are a number of mistaken ideas about exactly what kinds of debt can be discharged. At Skrupa Law Office, LLC in Omaha and Lincoln, our bankruptcy attorneys want you to be informed so you can make the wisest decision possible when considering whether bankruptcy is the right choice for your situation.
If you have questions about when filing for bankruptcy is the best course, it’s always best to speak directly with an attorney who specializes in bankruptcy law—only they can provide you answers regarding your specific case. With that being said, however, it is good to have some foundational knowledge. To clear up potential confusion, we’ve compiled a helpful list of dischargeable debts that you can reference before talking to us about bankruptcy.
1. Credit Card Debt
This is one of the most common forms of debt affecting Americans today, and unfortunately it’s also one of the most expensive. The ease of getting a credit card coupled with excessive fees and staggering interest rates can make this kind of debt self-perpetuating and thus very difficult to get out from under. In many cases, bankruptcy can eliminate credit card debt completely, giving you a clear path to better financial stability.
2. Mortgage Debt
Falling behind on mortgage payments can cause debt to build up very quickly, and bankruptcy may be an answer to alleviate this stress. If you file Chapter 13 Bankruptcy you can possibly save your home from foreclosure. If your home has been foreclosed or you are in default and want to surrender your home you can have the mortgage debt discharged in bankruptcy—not only does this include the outstanding mortgage amount, but also any fees associated with the default.
3. Medical Bills
When medical bills become as debilitating as the health problems that caused them, bankruptcy can provide a way out. An unexpected accident or illness can quickly cause debt to skyrocket, sometimes tens or hundreds of thousands of dollars which depending on your situation may be impossible to pay back, and bankruptcy can discharge these debts so you no longer owe them.
4. Unpaid Tax Debt
It’s a common assumption that unpaid tax debt cannot be discharged through bankruptcy, but this is false. Unpaid tax debt can in limited case cases be discharged, as long as bankruptcy code requirements are met. A rule of thumb when it comes to bankruptcy and taxes is that unpaid taxes are usually dischargeable if they are older than three years.
5. Vehicle Loans
If you’ve fallen behind on a vehicle loan, this debt can be discharged through bankruptcy, though there are various stipulations. As a secured loan, the discharge of a vehicle loan in bankruptcy usually means that the vehicle will be returned to the lender.
6. Personal Loans
Personal loans that you’ve signed documentation to receive can be discharged by the bankruptcy court. This type of loan is generally unsecured, meaning that the discharge in most bankruptcy cases doesn’t put your personal property at risk. If you provided collateral for the loan, then it is considered secured, and just like an auto loan you will have to surrender the property.
Contact Skrupa Law Office, LLC Today!
The decision to file for bankruptcy is an important one, and that’s why it’s essential for you to be informed about your options, as well as what bankruptcy can and cannot do for you. If you have questions about bankruptcy or need help making the decision to file, give Skrupa Law a call today at either of our local law offices in Omaha (402) 571-2900 and Lincoln (402) 464-3311.