So many of us have things weighing on us that we’d love to do away with, without having to break a sweat. There are whole genres of movies and TV shows devoted to this idea, in fact.
Characters use time travel to go backwards or forwards through reality, so that they can skip past their problems, or go back and make it so they never have to deal with them in the first place. Or they use some sort of magical machine or remote control to skip past their difficulties, hit pause in a moment of crisis, or rewind in order to do the right thing. Or then there’s the Marvel comics route, where some characters can gather a bunch of jewels, then snap their fingers and immediately make everything that’s annoying them disappear (no spoilers, but you know who we mean).
It’s human nature to want to solve our problems as quickly and easily as possible. But in reality, it often takes a bit more work – even though the results can be even more impactful and long-lasting in the end.
Bankruptcy is one such solution, where people tend to have extreme views. Either people see bankruptcy as a long, challenging, and intensive process, or they see it as a way to instantly get rid of debts and obligations with little more than a snap of the fingers.
In reality, of course, the truth is between these two poles.
The Truth About Bankruptcy
Bankruptcy is a way for consumers grappling with severe indebtedness to hit pause and get a chance to reset their financial life, either by discharging or restructuring their debts (or some combination of the two). Bankruptcy can be a way for debtors to regain their financial footing, get out from under their crippling debts, and rejoin the economy. However, it’s also important to remember that bankruptcy isn’t going to be a one-size-fits-all solution. Bankruptcy can be an effective remedy – for some. Ultimately, it’s all going to come down to factors unique to your situation – your lifestyle, your goals, your income and expenses, and the types and amounts of debt you may be dealing with.
“What Debts Can I Discharge in Bankruptcy?”
To that last point? One of the FAQs that we get most often is from debtors asking about which types of debt are automatically dischargeable – that is, able to be rendered as no longer your responsibility by a bankruptcy court order – and which are not. Depending on your circumstances, bankruptcy may not immediately erase your debts (though it may provide other significant advantages and opportunities). This is important to keep in mind.
Bankruptcy may not automatically relieve you of all of your debts, but there are certain debts that are automatically dischargeable, in certain circumstances. Other types of debts can be restructured, in order to make them more manageable over time.
So, with all that being said, what are the debts that most consumers can expect to be able to discharge with bankruptcy? Some common examples of dischargeable debts include:
- Credit card debts
- Medical bills
- Debts from car accidents, some lawsuit judgments, etc.
- Personal loans (such as from friends and family)
- Promissory notes
- Certain utility bills
- Past due rent (and other debts stemming from lease agreements)
On the other hand, there are also common debts that cannot typically be discharged automatically in bankruptcy. Some common examples of non-dischargeable debts might include:
- Child/family support obligations and alimony
- Criminal penalties
- Many types of tax debt
There is a third category, as well, which encompasses debts that are typically not dischargeable, but which you may be able to discharge, if you can get an exception based on your unique circumstances. The most common example here would be student loan debts.
Of course, there are other extenuating factors and conditions to consider. Ultimately, it’s important to remember that there’s no such thing as a “typical” bankruptcy.
Secured Vs. Unsecured Debts
With that said, one rule of thumb you may hear discussed – particularly when you’re debating whether or not to pursue bankruptcy as a strategy for debt relief – is to determine how many of your debts are secured, and how many are unsecured. This distinction can become incredibly important.
Why? Well, a common rule of thumb is that may types of unsecured debts can generally be discharged in bankruptcy, while most secured debts cannot be automatically discharged. Unsecured debts are debts that are based purely on your promise to pay them back, usually with interest. This category may include credit cards, medical bills, some retail store loans, payday loans, and so on. Secured loans are based on the offering of property – such as your home, car, bonds, or assets – as collateral. In this set-up, if you do not pay the debt, the creditor can claim the property in exchange. Secured debts are typically said to be nondischargeable
As we said, though, bear in mind that this is simply a commonly cited rule of thumb to consider, not an “end-all-be-all” guide. As we have noted repeatedly, it’s important to remember that no two people are going to have identical circumstances when it comes to matters of debt or bankruptcy.
When weighing bankruptcy as a potential course of action, keep your specific questions and concerns top of mind. Beyond getting a handle on which types of debt you have, you’ll also want to consider the different types of bankruptcy available (and whether or not you’ll qualify for them), as well as practical alternatives that could work for your specific situation.
About the Gunderson Law Firm
If you’re looking to continue the conversation with experienced bankruptcy attorneys in the Chicagoland area, don’t hesitate to get in touch with the Gunderson Law Firm.
In your free initial consultation, our staff can help to provide you with actual, straightforward answers specific to your situation. No need to search for all the variables and hope you don’t miss any key detail — just call, and we will help set you down the right path to the fresh financial start you truly deserve, whatever it takes.
At the Gunderson Law Firm, we will take all steps possible to protect you and your assets immediately and throughout the bankruptcy process, while also counseling you on realistic ways to avoid such serious debt issues in the future. Whether you are a business owner, a wage earner, retired, or otherwise, we can help address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again. Drop us a line if you’d like to continue the discussion online or in-person.