When you file bankruptcy, most debts can be eliminated. Unsecured debts are usually eligible for discharge, credit cards, medical debt, utilities, payday loans, some taxes, and other loans that do not have collateral attached to them. There are certain exceptions that some of these types of debts cannot be discharged in bankruptcy.
The types of debt in bankruptcy is a broad topic. This article lists the exceptions to debt discharge and only mentions a few of them. Consumers can also go to in their state court to see if there are any exceptions for their state. There are two main types of debt: secured and unsecured.
A secured debt is one that is tied to assets or property as collateral. It can usually be eliminated in bankruptcy under the Chapter 7 process. Most mortgages are secured by the house until the mortgage is paid in full. There are other types of secured debt that often do not qualify for bankruptcy discharge. The most notable types of secured debt in bankruptcy are home equity loans and second mortgages. A car loan is also considered secured debt.
An unsecured debt is just that: Unguaranteed. Unsecured debts are easier to discharge in bankruptcy than secured debts. Credit cards, medical debts, unpaid utilities, and similar are all examples of unsecured debts. They are eligible for bankruptcy discharge if the person filing bankruptcy completed the bankruptcy process (a discharge that erases debts is called a “discharge”).
A tax debt may be eligible for discharge in bankruptcy depending on the type of tax debt. State income taxes usually cannot be discharged. However, if the taxes were unrelated to a person’s income, such as a sales tax, then it most likely can be discharged in bankruptcy.
Contact a Dallas bankruptcy attorney to learn more about how bankruptcy can eliminate your unique combination of debts today.