Lawyer Referral Service

LRS Blog

Posted by: Maricopa Lawyers on Apr 29, 2016

Debt is something that is all too far familiar to most Americans. But what options do you have when it keeps piling up with no end in sight. Debt can be overwhelming and seem never ending, so what’s the best way to resolve it?

Many people turn to bankruptcy to write off their debts, but what does this actually mean, and can really be written off?

Chapter 7 versus chapter 13 bankruptcy

In chapter 7 bankruptcy, people are able to eliminate debts like personal loans and credit card debt fairly quickly. In this form of bankruptcy there is no collateral for the loan that was not paid back. Although debtors may lose property such as their home or car, in order to pay back some debts, bankruptcy lets you keep necessities.

Chapter 13 bankruptcy is also used to eliminate debts, but it creates a payment plan that requires the debt be paid back usually over 5 years. This option helps save the home from foreclosure. Some people who make over a certain amount of money have no choice but to file for chapter 13 bankruptcy.

If you file for chapter 7 bankruptcy what debts can be written off?

Most credit card and personal debts can be written off in a chapter 7 bankruptcy. Below is a list of debts that will usually be eliminated:

  • Credit cards or unsecured loans
  • Car repossessions and deficiency balances
  • Some car accidents
  • Material supplier debts
  • Medical bills
  • Lawsuits and judgments
  • Evictions and unpaid rent
  • Unpaid utility bills
  • Foreclosure balances

Credit card or unsecured loans are the most common type of debt written off in bankruptcy. The only exception is if you’ve had excessive credit card use in the months before filing the creditor may object to eliminating the entire balance. The creditor may claim that you never intended to pay off the loan and require you to pay for the excessive use or expensive merchandise.

Although bankruptcy can help you eliminate debt, it’s not the solution for everybody. If you are unable to make payments or are overwhelmed by debt, speak to a lawyer.