Bankruptcy Chapter 7 and Chapter 13

When you file a Chapter 7 bankruptcy does all of your debt get discharged – wiped out?  Once discharged a creditor is prohibited from trying to collect the debt.  Typically this is the case, all unsecured debt is discharged and any secured debt on assets – like house or car-  which you choose to surrender is also discharged.  However, there are exceptions to the discharge or release of a debt in a chapter 7 bankruptcy - ask a bankruptcy lawyer.

One such exception is domestic support obligations which is any debt that arises from a domestic relations order (divorce or child custody) including child support, alimony, or marital debt — house, car, or credit cards.  There are some narrow differences in the classification of such debts and financial  obligations which need to be reviewed by a bankruptcy attorney.

Another type of debt that is not typically able to be discharged or released is taxes or other debts owed to a government entity (federal, state or local).  Although the automatic stay prevents collection activity even by the government without bankruptcy court approval, tax obligations can not be wiped out by bankruptcy.  However, the interest on tax debt is typically stopped upon the filing of a Chapter 13 bankruptcy.  There are some exceptions to this rule that should be discussed with a bankruptcy lawyer.

Among the many other exclusions from bankruptcy discharge that are enumerated in the United States Bankruptcy Code, other debts that are not dischargeable are student loans, and financial obligations arising from criminal activity or intentional torts (lie fraud, etc.)

Keep in mind that bankruptcy is very complicated and involves several rules requirements, exceptions, and restrictions to the ability to file and relating to the relief afforded. One of the primary requirements is passing the means test which shows if a debtor is truly insolvent or has the financial ability to pay at least part of the debts.  If you are contemplating either chapter 7 or chapter 13 bankruptcy speak to an attorney who practices bankruptcy law.