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3 Different Debts that Can and Cannot Be Liquidated Under Chapter 7 Bankruptcy

Households that carry a heavy burden of credit card debt can benefit from filing Chapter 7 bankruptcy and wiping away these loans. If you earn less than the average income in your state, it is likely that you may qualify for this discharge option. However, not all liabilities can be liquidated. Here are three examples:

Student Loans: Cannot Be Discharged
While student loans are technically unsecured debts, they cannot be written off in bankruptcy proceedings. Chapter 7 may allow you to invoke an automatic stay on these payments, but you will still owe your loans after completing the bankruptcy process. However, if you suffer a particular hardship that will not allow you to pay off the loans, a bankruptcy judge may be able to modify the loan or discharge part of the debt.

Unsecured Credit Card Debt: Can Be Discharged
Chapter 7 can help families with too many overdue credit card bills. So long as you meet the income requirements to file, this type of bankruptcy proceeding can wipe away your credit card loans and help you make a fresh start. Your bankruptcy attorney can help advise you how to best utilize Chapter 7 to turn over a new financial leaf.

Court-Mandated Child Support: Cannot Be Discharged
Your family and former spouse do not qualify as creditors. As a result, you cannot discharge any court-ordered child support and alimony obligations. A bankruptcy judge does not have jurisdiction over your agreement with the family law court, and you must still make all regularly scheduled payments despite filing for Chapter 7.

Cutler & Associates is a Chicago-area firm with years of experience helping households use the bankruptcy proceeding to efficiently wipe away their debts. We advise Schaumburg, Elgin and McHenry residents on how to make the most of the Chapter 7 proceeding. Our office offers free initial consultations, so contact us today by calling (847) 868-2265 to learn how we can help you start over.

 

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