Chapter 7 of the Federal Bankruptcy Code outlines “liquidation” or “straight” bankruptcy, which is the most common type of bankruptcy in the United States. In Chapter 7 bankruptcy, the bankruptcy trustee cancels many or all of your debts, while at the same time, liquidating some of your property to pay off your creditors. There are several confusing myths concerning Chapter 7 bankruptcy. Hopefully, the following will makes things more clear.
Common Myths About Bankruptcy
Some people hesitate about filing bankruptcy for fear of losing everything they own and never being eligible for credit again. You will not lose everything in the bankruptcy proceedings however, each state has its own specific set of exemptions governing what assets can or cannot be seized. It is also possible to file either alone or with your spouse, depending on which method of filing would be more beneficial to your particular financial situation.
Debt Not Always Discharged during Bankruptcy
Another very common myth is that bankruptcy will wipe all your debts clean. Many factors are involved in the discharge of debts. Three main reasons a debt may not be dischargeable include:
- Under bankruptcy court, the debt is specifically listed as non-dischargeabl
- A creditor may successfully object to the discharge of a deb
- The bankruptcy court may simply refuse to discharge a debt
Chapter 7 Not Dischargeable Debts
Some exceptions apply but debts commonly not dischargeable under Chapter 7 include:
- Tax debts
- Child support and alimony payments
- Student loans
- Court fines and penalties
- Personal injury debts from a DUI
Many exceptions to bankruptcy are applicable which are not listed in the Bankruptcy Code. Some exceptions involve particular payments and education benefits extended to those in the armed forces and scholarships given to American Indians for healthcare services training. Debts to which a creditor successfully objects will not be discharged. Debts commonly objected to by creditors include, luxury items purchased by credit card within 90 days of filing for bankruptcy and debts obtained through fraud, or willful and malicious injury to a person or person’s property. Furthermore, a bankruptcy court can refuse the discharge of a debt if a debtor fails to follow court procedures, refuses to produce requested documents, hides property in order to defraud creditors, or violates a court order. Most importantly, no bankruptcy court will discharge any of your debts until you attend a debtor education course. This is one bankruptcy rule that has no exceptions.
Contact a Dedicated Austin Bankruptcy Attorney
Each bankruptcy case has its own unique set of circumstances. If you would like for us to examine your situation, contact our Dripping Springs Texas Law Firm today to speak with an attorney. Call (512) 615-3569to find out how Attorney R. Brian Daniel has helped many other people with legal questions just like yours!