If you’re dealing with a lot of debt, bankruptcy may be a good option for you. Many types of debt can be eliminated through bankruptcy. However, it’s important to know that not all debt can be cleared in a bankruptcy case. The way debt is eliminated and types that can be cleared depend on the type of bankruptcy you use.

Clearing Debt Through Bankruptcy

While it is true that you can clear a significant amount of debt by filing bankruptcy, the process is different depending on what type of bankruptcy. Most individuals use either Chapter 7 or Chapter 13 bankruptcy, both of which can be used to attain a clean debt slate for most types of debt.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is also known as “liquidation bankruptcy.” It allows you to discharge (or completely clear) most of your debt in the end. However, you may be required to sell (or “liquidate”) some of your personal property to pay off some debts. There are legal exemptions that allow you to keep certain personal property, such as a home or car.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also called “reorganization bankruptcy,” involves establishing a three- to five-year payment plan that will allow you to repay your debts over time. Through this method, you will be clearing your debts; however, it does involve paying them yourself in order to get that clean slate. There are circumstances in a Chapter 13 bankruptcy when you can discharge some debt as well.

What Does It Mean to Discharge Debt?

Discharging debts means that you no longer have to pay that debt. In a Chapter 7 bankruptcy, many types of debts are discharged, or cleared entirely without repaying them. In a Chapter 13 bankruptcy, your debt is reorganized into a payment plan. You pay some or most of it, but remaining debt after your payment plan period may be discharged as well.

What Types of Debts Can Be Cleared in Bankruptcy?

There are several types of debts that can be discharged, or cleared, through both Chapter 7 and Chapter 13 bankruptcies without having to repay anything. Those include:

  • Unsecured debt
  • Credit card debt
  • Personal loans
  • Medical debt
    • It’s important to know that creditors can object to the discharge and try to get some type of payment. Unsecured debt is most likely to be discharged quickly through Chapter 7. It may be included in your Chapter 13 payment plan.

      What Types of Debts Cannot Be Cleared in Bankruptcy?

      There are also multiple kinds of debts that cannot be discharged unless certain conditions are met, if at all. Those include:

      • Child support
      • Alimony or spousal support
      • Tax debt (with some exceptions)
      • Debt accrued through improper behavior (such as a drunk driving or criminal fine)
      • Student loans (unless they pose a hardship)

      Additionally, legal fees cannot typically be discharged. For bankruptcy services, legal fees are typically paid upfront or worked into a payment plan.

      Should I File Bankruptcy to Clear My Debt?

      Determining whether or not bankruptcy is a good choice for you is a complex issue. It’s best to work closely with a bankruptcy lawyer who can review your specific situation and help you choose a path forward.

      If you have a lot of unsecured debts, Chapter 7 bankruptcy might be a good option for you. In just months, you may have your debts cleared and start over with a clear financial slate. Keep in mind, though, that Chapter 7 bankruptcy does remain on your credit report for up to 10 years.

      Chapter 13 will also help you clear most of your debt, but it will take longer. In the process, you will end up repaying some or all of it. It is possible to get debt discharged in Chapter 13. Like Chapter 7, Chapter 13 will remain on your credit report for years – up to seven in most cases.

      How Can a Bankruptcy Attorney Help Me Clear My Debt?

      A bankruptcy attorney can help you decide if bankruptcy is right for you. They can explain bankruptcy laws and help you understand the difference between types of bankruptcy. Your bankruptcy lawyer will evaluate your debt and determine how to clear it effectively.

      Clear Your Debt with the Help of Clark & Washington

      The experienced bankruptcy attorneys at Clark & Washington have helped countless clients clear their debt. We know that you want to start over without the heavy burden of debt. Bankruptcy can give you that opportunity.

      Call us today at (865) 689-1777 to discuss your case with one of our skilled Chapter 13 and Chapter 7 bankruptcy lawyers.