Bankruptcy can be a useful tool for those struggling with debt. If you’re considering bankruptcy, you may be wondering what debts can be included in the process. In this post, we’ll discuss the types of debts that can be included in a bankruptcy.
Secured Debts
Secured debts are those that are backed by collateral, such as a car loan or a mortgage. In a bankruptcy, you have a few options for handling secured debts:
- Surrender the collateral: If you can’t afford to make the payments on a secured debt, you can surrender the collateral and have the debt discharged in bankruptcy. This means that you’ll no longer be responsible for the debt, but you’ll also lose the collateral.
- Reaffirm the debt: If you want to keep the collateral, you can reaffirm the debt. This means that you’ll continue to make payments on the debt as if you never filed for bankruptcy. You’ll need to stay current on your payments to keep the collateral.
- Redeem the collateral: If the collateral is worth less than the amount you owe on the debt, you can redeem it by paying the current value of the collateral. This can be a good option if you want to keep the collateral but can’t afford to continue making payments on the debt.
Unsecured Debts
Unsecured debts are not backed by collateral, such as credit card debt, medical bills, and personal loans. In a bankruptcy, most unsecured debts can be discharged, meaning you won’t have to pay them back. However, there are some exceptions:
- Student loans: In most cases, student loans cannot be discharged in bankruptcy. There are some exceptions, such as if you can prove that repaying the loan would cause an undue hardship.
- Taxes: Some tax debts can be discharged in bankruptcy, but there are certain requirements that must be met. For example, the taxes must be at least three years old, and you must have filed a tax return for the debt at least two years before filing for bankruptcy.
- Child support and alimony: These types of debts cannot be discharged in bankruptcy.
- Debts incurred through fraud: If you incurred a debt through fraud or false pretenses, it cannot be discharged in bankruptcy.
Other Debts
There are some other types of debts that may or may not be dischargeable in bankruptcy, depending on the circumstances. These include:
- Debts incurred within 90 days of filing for bankruptcy: If you incur debts within 90 days of filing for bankruptcy, they may not be dischargeable. This is because creditors may view these debts as an attempt to take advantage of the bankruptcy system.
- Debts incurred through willful or malicious injury: If you caused harm to someone and were ordered to pay damages, these debts cannot be discharged in bankruptcy.
- Debts from a divorce settlement: If you were ordered to pay a debt as part of a divorce settlement, it may or may not be dischargeable in bankruptcy.
In conclusion, most types of unsecured debts can be discharged in bankruptcy, but there are some exceptions. Secured debts can be handled in a few different ways, depending on whether you want to keep the collateral. If you’re considering bankruptcy, it’s important to speak with an experienced bankruptcy attorney to determine which debts can be included in your specific situation. Karra L. Kingston helps many people in New York and New Jersey file for bankruptcy. 