The process of declaring bankruptcy can be complicated, emotionally taxing, and perplexing. No one makes this choice lightly, so you need to understand exactly what it means for you. As difficult as it feels, it might be a genuinely wise financial choice that allows you to become debt-free and feel like you can breathe again.
One of the most popular methods used by people to discharge debt is a Chapter 7 bankruptcy. The exact debts that are covered by Chapter 7 are something that people frequently have questions about.
Chapter 7 bankruptcy discharges unsecured debts
When it comes to unsecured debts, the main examples of these are:
- Credit cards
- Personal loans (excluding a mortgage and auto loan)
- Payday loans
- Medical bills
These kinds of everyday debts are those which can easily and quickly spiral out of control, leaving people unable to see a way out and in an intolerable situation. They often have hefty interest rates, which make it nearly hard to ever pay them off.
A Chapter 7 bankruptcy cannot be used for all debts
There are some debts not covered by a Chapter 7 bankruptcy. These include:
- Any recent tax obligations
- Student loan debts
- Recent tax obligations
- Big, luxury purchases or cash advances that have been made on credit cards
- Anything that you did not include in your bankruptcy petition (unless it is something that was genuinely forgotten)
People worry about losing their homes while filing for Chapter 7 bankruptcy. The good news is that as long as you can afford to make your loan payments, you can keep your house and car.
The decision to file for bankruptcy is a significant and challenging step toward financial freedom. Take some advice to make sure that you are safeguarding your assets and that the process goes as smoothly as possible.