Perhaps you are contemplating Chapter 7 bankruptcy but are not quite sure if you are pursuing the right type. Though there are several branches of bankruptcy available, Chapter 7 might seem more beneficial if you are looking to eliminate most, if not all of the delinquent debt that has dragged down your financial situation over the years.
Chapter 7 does not require a repayment plan like Chapter 13 does. Instead, in Chapter 7 bankruptcy, creditors can seize your assets as payment for your financial obligations. Some debts are not dischargeable in Chapter 7 bankruptcy, especially if they involve fraud, misrepresentation or debts that you incur after the filing date on your bankruptcy petition.
Types of debt that qualify for bankruptcy discharge
Debts that are dischargeable must also satisfy other criteria. The courts require petitioners to include full disclosure of eligible debts they want to no longer have liability for. Exemptions are available for petitioners who fear having their vehicles repossessed or homes foreclosed on.
Types of debts that are dischargeable under Chapter 7 bankruptcy include:
- Credit cards
- Medical bills
- Delinquent tax obligations
- Certain civil judgments
- Auto loans
- Mortgage loans
- Business debts
Chapter 7 bankruptcy may seem like the more desirable option because of the promise of debt elimination. However, if you have a modest income, are unable to pass the means test or are only experiencing a temporary or short-term financial setback in which you anticipate catching up on your delinquent accounts and debts in a few years, you may want to consider an alternative to Chapter 7, such as Chapter 13. Unlike Chapter 7, Chapter 13 allows you to restructure your debts into a more manageable repayment plan and maintain ownership of your assets.