Can Bankruptcy Wipe Out All Debt?

Bankruptcy Cannot Wipe Out All Debt of This Type 

In Chapter 7 and Chapter 13 bankruptcy cases in Chesterfield, VA, most of the debt is discharged or erased. You do not have to pay this debt, and creditors cannot seek payment from you. This is true for many types of debt, including credit card debt.

The federal Bankruptcy Code lists 19 categories of debt that are difficult or even impossible to discharge. The government determined that these obligations must be paid, either due to the nature of the debt or because the debt was incurred as a punishment. The most common of these debts include:

• Child and spousal support. Bankruptcy cannot wipe out debt that results from your obligation to a former spouse or your children. You will need to pay what you owe at the end of the process.
• Student loans. Student loan law has changed since 2020. Although you must still prove extreme circumstances for a discharge in bankruptcy, your Federal student loan payments could be $0 per month with the right payment plan. Private loans and tuition assistance directly from a university are often handled differently.
• Taxes. Like student loans, it is difficult but not impossible to eliminate tax debt. The strict rules and deadlines that you must meet to obtain a discharge are complex, and not everyone may be eligible.
• Restitution or personal injury. If you were involved in a DUI accident or other court case that resulted in restitution or payment to a victim, you must pay. When your careless action hurts another, you are obligated to pay that debt.

Even if you cannot entirely wipe out debt through bankruptcy, filing for Chapter 13 or Chapter 7 bankruptcy can help you address your debt burden. It can help make your financial obligations that remains, manageable. Consolidation and other repayment options can be arranged.