Bankruptcy Attorney in Minneapolis Explains Which Debts Are Relieved by Bankruptcy
This is one of the most common questions asked by people contemplating filing bankruptcy.
Certain debts are not dischargable in bankruptcy and it is important to distinguish between what can be discharged and what cannot be discharged. A knowledgeable bankruptcy attorney in Minneapolis can identify the debts that can be discharged if you file and the debts that will not be discharged.
Debts That Can Be Discharged
- Unsecured debts such as credit cards, cash advances, etc.
- Medical bills
- Foreclosure judgments
- Vehicle repossessions
- Utility bills
- Personal loans
Credit Card and Other Unsecured Debt
The most common type of debt discharged in a bankruptcy is unsecured debt, and the most common type of unsecured debt is credit card debt. The vast majority of debtors in bankruptcy are suffering from some form of credit card debt. Most credit card debt is dischargeable due to it not being secured by anything, such as a vehicle or a home, to protect the creditor’s interest in the loan they provided you. As a result, nothing protects the loan from being discharged in a bankruptcy.
However, there are a few situations where your credit card debt may not be dischargeable. Most of these cases involve some level of fraud or high usage in the last few months before filing bankruptcy. Otherwise, credit card debts are normally discharged in bankruptcy.
Another common debt discharged in bankruptcy is medical debt. Many debtors are facing bankruptcy due to an injury or illness that kept them from working. In addition, their insurance may have covered only a portion of their medical expenses and they face a mountain of medical debt as a result. Unfortunately, creditors and courts do not care if you are sick or disabled and will still find you liable for the debt. As a result, filing bankruptcy may be the best protection against overwhelming medical bills.
Foreclosure and Deficiency Judgments
Foreclosures occur when your home is taken back by the lender. In certain situations, you may still owe money despite losing your home to foreclosure. Many lenders auction off the home for less money than it is worth and if you owe more than what the auction price was, you may be responsible for the remainder of the debt, known as a deficiency judgment. If that occurs, bankruptcy might be the safest option for you as the foreclosure debt will be discharged. Bankruptcies can also eliminate the foreclosure from appearing on your credit report and negatively affecting your credit.
Vehicle Repossessions and Repossession Shortfall
Another common type of debt dischargeable by bankruptcy is a vehicle repossession shortfall. Some debtors have trouble paying their car payments and end up losing the car to repossession. Much like a mortgage foreclosure, the car is then auctioned off by the creditor and any amount owed not covered by the auction price remains with the debtor as a deficiency judgment.
This is a very common situation that can drive people into filing bankruptcy as no one enjoys having to pay on a vehicle that has already been taken away. If you are facing this situation, then you should contact an experienced bankruptcy attorney in Minneapolis and see if bankruptcy is a good option for you.
Utility bills are a less common type of debt that can be discharged in bankruptcy. These can include electricity bills, cable bills, cell phones bills, internet bills and gas bills. While these debts alone should not push someone into filing bankruptcy, know that they can be discharged and removed from your credit report.
Many people in bankruptcy have been evicted at some point prior to their filing. Back rent from past evictions will be discharged in bankruptcy. However, a debtor who files bankruptcy is not fully protected from being evicted simply by filing bankruptcy. Many debtors file bankruptcy to freeze the eviction process and the process does freeze temporarily.
However, the bankruptcy court allows a landlord to file emergency motions to lift the bankruptcy freeze and regain possession of the property if the debtor cannot settle with the landlord on paying the back rent. However, the unpaid rent will be discharged in the bankruptcy.
Most people do not like to include personal debts when they file bankruptcy when these debts are owed to someone they know, such as a friend or family member. But you are required to list all debts owed when filing bankruptcy, so personal loans should be listed and discharged in a bankruptcy.
Bankruptcy attorney Gregory J. Wald can assist you in determining what debts, if any, are dischargable in a bankruptcy. Call (952) 921-5802 to schedule a consultation.