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Which debts can you discharge in a bankruptcy filing?

When you lose control of your personal finances, your obligations can pile up to a point where you can’t repay them. Falling a few months behind on your mortgage and your credit card bills might mean that you face aggressive collection tactics while still trying to balance your household budget. 

Your decision to file for bankruptcy can help you regain financial control in several ways. First, it provides you with an automatic stay that halts collection calls and pending lawsuits. You may also receive a discharge of your unsecured debt if you complete the bankruptcy process successfully.

If you’re seriously considering filing for bankruptcy, then you might wonder which of your debts are eligible for discharge in bankruptcy proceedings. You may also want to know which ones will you have to continue to pay.

Bankruptcy primarily discharges unsecured personal debt

You can break your debts into two main categories with relative ease. Secured and unsecured debts have one noteworthy difference. Secured debts are backed by collateral property that protects the lender’s interest if a borrower defaults. Unsecured debt, like credit cards and medical bills, have no property pledged toward the enforcement of the debt. 

In a bankruptcy filing, you will usually have the opportunity to discharge most of your unsecured debts. However, some debts, like student loans, tax debts and court judgments, like child support, may not be eligible for discharge

Your secured debts, like your vehicle loan and your mortgage, may be eligible for renegotiation. Especially in a Chapter 13 filing, you may be able to talk with your lenders and reach a new arrangement that makes repaying the debt a little bit easier for you. 

Understanding how bankruptcy works can help you make the best decision for yourself in a time of financial hardship.