Will Bankruptcy Help With Credit Cards, Loans, and Medical Bills?
Chapter 7 bankruptcy deals powerfully with unsecured debts (like credit cards, loans, and medical bills) and secured loans where you don’t want to keep the property. For example, if your car loan is too high and you have other transportation, you may want to “surrender” the vehicle. The Chapter 7 Bankruptcy Discharge makes these debts uncollectable.
Will I lose my home or vehicle if I file for bankruptcy?
With secured debt (usually a home and cars) in Chapter 7 bankruptcy, you may keep the item, but you have to pay for it according to the contract. You will need to reaffirm a secured debt in Chapter 7 bankruptcy. This means you want to keep the secured property and will continue to pay according to the original contract. If you can’t afford to pay the current monthly payment or you are behind, Chapter 13 bankruptcy may help you catch up. Most home payments can’t be lowered in Chapter 13 bankruptcy. You may be able to lower your car loan with Chapter 13 if keeping your vehicle is a must and you can’t afford the current payment. That is not automatic though, so consult a bankruptcy lawyer to see if you can.
Another option with Chapter 7 is called redemption. You may be able to redeem the property by filing a motion to pay the value of the property in a lump sum, rather than what is owed. While redemption of property can save money, most people don’t have the cash to redeem.
Will Bankruptcy Get Rid of Taxes I Owe?
Most taxes cannot be forgiven in a bankruptcy. However, bankruptcy may prevent tax liability known as “cancellation of debt” income where your creditor sends you a Form 1099 for “charged off” debt in the same year or after the bankruptcy is filed. Discharge of certain debts, such as rental property, may have tax consequences. Consult with your account about the impact of bankruptcy on your taxes.
Some taxes can be discharged depending on the type and age.
Will Bankruptcy Eliminate My Student Loans?
In very limited, extreme circumstances, student loans can be discharged if you have great hardship and will never be able to pay the student loans.