When you file for a bankruptcy, you are no longer liable for a part or all of your debts, and don’t have to pay your creditors anything. Plus, third parties or debt collectors cannot approach you anymore. The formal term used for this is a bankruptcy discharge or a general discharge.
Generally, when your debt is discharged, your credits can’t take any actions against you. They can’t reach out to you over phone, send any letters, file a lawsuit or take money from your wages. However, if you cosigned the debt with someone, the lender can continue to collect from them and seize your collateral.
Dischargeable and Non Dischargeable Debts
Though many kinds of debts are discharged, there are still some that aren’t. If you file for chapter 7 or chapter 13 bankruptcy, then your medical bills, utility bills, rent, lease payments, personal loans, overdrafts and promissory notes are discharged. Debts like taxes, penalties or fines incurred due to a crime and support obligations are not discharged.
Please note that more debts can be discharged for chapter 13 bankruptcy than chapter 7 bankruptcy.
Possibly Dischargeable Debts
Some debts may be discharged subject to certain conditions or requirements. For instance, a student loan is usually not discharged, but a possibility of it being discharged does exist. You’ll have to file an adversary proceeding and provide proof of some requirements. If your creditor wins the adversary proceeding, then you will have to pay back the remaining balance.
If you put up an asset as collateral, the debt is treated as secured. For all these debts, the creditor can take away your collateral if you default on the loan. Home mortgages and car loans fall under this category. You may be able to redeem the asset in some cases, but this isn’t possible for residential property.
The bankruptcy process can be complicated. Always consult your Dayton bankruptcy lawyer for more information before making a debt relief decision.