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Debt can be a burden that gets out of control and soon the debtor finds themselves in deep financial trouble. Whether you’ve overleveraged your assets or were hit by outrageous medical bills, there is relief from your debts through bankruptcy. It’s not usually the route a person or business wants to take. However, it is an option that can pay off for the right person and discharge a large proportion of their debt, but which debts?
When you file for bankruptcy, you are essentially asking the U.S. bankruptcy court to eliminate or discharge some or all your debt. When your debts are discharged, you are no longer liable for the balance, and all collection activities must cease.
You can have the following debts discharged if you file bankruptcy:
Accounts with collection agencies
Back taxes beyond a specific number of years
Balances left after car repossession
Bounced checks unless they were fraudulently written or obtained
Business-related debts
Civil claims for traffic accidents and premises liability settlements
Credit card debt including late fees
Federal benefit overpayments including veteran’s assistance and social security
Foreclosure balances
Medical bills
Past due rent and utilities
Personal loans
Other debts not on the list above can be discharged through Chapter 7, Chapter 11, or Chapter 13 bankruptcy.
Student loans are not usually discharged in bankruptcy, but there have been rare instances in which judges have included student loans in bankruptcy verdicts. In those cases, the person requesting student loan discharge had to demonstrate that they have an extreme hardship that makes them unable to pay the debt. For instance, someone who becomes paralyzed and unable to work may have their student loans dismissed.
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