Upset woman holding credit cardsChapter 7 personal bankruptcy laws allow Americans who are overburdened by bills to have many types of debt wiped away. One way to understand this debt relief is to talk about the kinds of debts that do not disappear.

Debts included in a bankruptcy proceeding can usually be discharged unless they fall under one of the exceptions listed in the bankruptcy code or unless the bankruptcy judge decides that you should pay the debt based on the circumstances of the case.

Most Unsecured Debts Disappear

Most types of unsecured debt can be discharged through personal bankruptcy. An unsecured debt is one that is not attached to an item of property that guarantees payment through the possibility of foreclosure or repossession. The most common types of unsecured debts that people discharge through personal bankruptcy are credit card bills, personal loans and medical bills.

Secured Debts May Be Erased

Secured debts include items you have financed, such as a car or a house, which were used as collateral to secure financing by giving the creditor the right to take the item back if you stop paying. These debts do not automatically disappear when you file bankruptcy, but you usually have the option of getting out of the debt if the terms of the financing arrangement have become unbearable. Depending upon the type of personal bankruptcy, you can often give back the property and void the financing agreement.

Federal Income Taxes and Personal Bankruptcy

Federal income tax obligations may or may not be dischargeable under personal bankruptcy, depending upon the status of the tax delinquency and the type of personal bankruptcy case you file. A federal income tax debt starts out as an unsecured personal debt. However, the Internal Revenue Service has the option of filing a tax lien against your property to secure the debt.

If you file a bankruptcy petition while your past tax obligations are still unsecured, you may be able to discharge the debt. You cannot discharge the tax debt after the IRS has secured the debt through a tax lien. Further, the tax obligation has to be more than three years old to be eligible for discharge in bankruptcy.

Bankruptcy Stops Garnishments

Personal bankruptcy will stop any garnishments that result in money being deducted from your paychecks. The underlying debts that caused the garnishment may or may not be discharged, however. Unsecured debts will likely be discharged, while debts arising from unpaid child support or alimony won’t be discharged because they fall under an exception in bankruptcy law.

Certain Personal Judgments Can Be Discharged

Court judgments against you that do not involve intentional infliction of personal injury, intentional property damage or drunk driving will usually be wiped out by Chapter 7 personal bankruptcy. If a judgment has been entered against you for a car accident, for example, you'll likely be able to discharge the debt, provided that the judgment does not involve any of the discharge exceptions.

A Personal Bankruptcy Lawyer Can Help

The law surrounding discharge of debts in personal bankruptcy is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a bankruptcy lawyer.

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