Limitations Of Chapter 7 Bankruptcy

12 October 2018
 Categories: Law, Blog


If you have a lot of debt and cannot seem to get any of it paid off, choosing to file for Chapter 7 bankruptcy might be a good solution for your debt issues. If you file, you can receive a discharge for the qualifying debts you have. The discharge is the main benefit of Chapter 7, but it is important to understand that there are some limitations with Chapter 7, and here are several things you should know before you file.

Chapter 7 discharges qualifying debts

To understand the effects of the discharge you will receive in bankruptcy, you will need to understand what qualifies a debt for discharge. In most situations, debts that qualify for discharge include any debts that are unsecured. Some of the prime examples of debts that would qualify include medical bills, credit card bills, and personal loans. If your debts are primarily due to for these types of bills, you should know that they will likely get discharged if you file for Chapter 7.

Chapter 7 will not discharge non-qualifying debts

So, if those are qualifying debts, you should also learn about non-qualifying debts. Non-qualifying debts are the types of debts you will have to pay even if you file for Chapter 7, as Chapter 7 will not offer a discharge for them. This category of debt includes money you owe for student loans, IRS taxes, and alimony or child support. There are situations where you might be able to get IRS taxes discharged, but this is rare. If you owe money for these types of debts, you should realize that you will still owe them if you file for Chapter 7.

Other limitations to consider

The other thing you should understand before filing is how past-due balances work on loans you have, including car loans and your house loan. If, for example, you are past-due on your house loan, you will need to find a way to catch up on the payments, as bankruptcy will not discharge the past-due balances. If you are past-due on debts like these, your lenders could foreclose or repossess your house and car. If you are in this situation, talk to your lawyer before filing to find out what you can do to avoid losing your house or car.

Even though Chapter 7 has limitations, it can help you overcome your debt problems and get a fresh start. If you would like to learn more about how Chapter 7 could help you, contact your local bankruptcy law services today.