is a legal process that allows individuals or businesses to seek relief from overwhelming debts and obtain a fresh financial start. While bankruptcy can provide significant debt relief, it does not discharge all types of debts. The dischargeability of debts depends on the type of bankruptcy filed and the specific circumstances surrounding the debts.
There are two common types of bankruptcy for individuals
Chapter 7 and Chapter 1
In Chapter 7 bankruptcy, also known as liquidation bankruptcy, most unsecured debts can be discharged. Unsecured debts include credit card debts, medical bills, personal loans, and certain types of taxes. However, there are exceptions to discharge, such as student loans, child support, alimony, certain tax debts, and debts incurred through fraud or illegal activities.
Chapter 13 bankruptcy, also known as reorganization bankruptcy, involves creating a repayment plan to pay off debts over a period of three to five years. Under this type of bankruptcy, you may be able to discharge a portion of your debts, but not all of them. The remaining debts will be included in the repayment plan, and you will make regular payments to a bankruptcy trustee who will distribute the funds to your creditors.
It’s important to note that bankruptcy laws can vary by jurisdiction, and there may be additional factors that affect the dischargeability of debts. Consulting with a bankruptcy attorney is crucial to understand the specific rules and regulations applicable to your situation.
In summary, bankruptcy can provide relief from many types of debts, but not all debts can be discharged. The dischargeability of debts depends on the type of bankruptcy filed, the nature of the debts, and other factors specific to each case.