Every year, many people file for bankruptcy to gain debt relief. Once the process has been successfully completed, a discharge is generally granted, permanently wiping out eligible debts and providing a fresh financial start. However, there are certain kinds of debts personal bankruptcy won’t dismiss. When considering this option, it’s important to understand what it can and can’t do for you. Here’s an overview of which accounts qualify for elimination.

Dischargeable Debts 

Chapter 7 and Chapter 13 are the two main types of personal bankruptcy. With Chapter 7, debts are typically discharged within a few months of filing. Under Chapter 13, debts are repaid over three to five years before any remaining balances are discharged. 

Debts eligible for discharge include those that are unsecured, meaning they aren’t backed by collateral, like credit card bills, medical expenses, personal loans, past-due utilities, and civil judgments. In addition to these, Chapter 13 can eliminate debts incurred to pay off a tax liability, money owed for willful and malicious damage to someone else's property, and financial obligations to a former spouse that aren't considered support.

Debts That Survive Bankruptcy 

Non-dischargeable debts can be split into three categories: those that are never dismissed, those that may be dismissed through a legal exception, and those that can’t be dismissed because of a creditor objection. Common examples that fall into the first category are child support, alimony, certain tax obligations, and personal injury debts assigned from a drunk driving incident. Student loans are included in the second category. Although difficult to do, these may be discharged when a debtor is able to demonstrate undue hardship. The last category involves debts associated with embezzlement, fraud, and charges made after filing.

If you’re interested in seeking a discharge of debt, turn to Donald L. Spafford, Jr., Attorney at Law, in Honolulu, HI, for help determining the best solution. Offering nearly 40 years of experience and in-depth knowledge of personal bankruptcy laws, he’s qualified to provide the personalized guidance you need to regain control of your finances. Call (808) 532-6300 to schedule a free consultation, or learn more about his practice areas online.