Potential bankruptcy clients often ask about the types of debt that can be discharged in bankruptcy. For example, some people have the mistaken belief that only credit card debt, or personal loans, or medical bills, or taxes can be put in the bankruptcy. In fact, when filing bankruptcy the attorney should include every single debt of every type, because that’s what the law requires. And, lucky for the client, bankruptcy wipes out every kind of debt, except debts the debtor obtained by fraud or dishonest conduct.
Credit Card Debt is Wiped Out in Bankruptcy
Credit card debt, including department store cards, is fully dischargeable in bankruptcy. In fact, the majority of cases are filed for that purpose.
Personal Loans are Wiped Out in Bankruptcy
Personal loans are fully dischargeable in bankruptcy, including loans from banks, credit unions, and other commercial lenders, as well as those from other sources, like family members, friends, etc. Note: Although debts owed to family and friends are required to be listed, you may choose to repay the loan after the bankruptcy is done, if you want to. The legal obligation to do so is gone, but some clients feel a moral obligation to pay it back.
Medical Bills are Wiped Out in Bankruptcy
Many people are forced to file bankruptcy because of overwhelming medical debt. Sometimes clients have incurred crushing medical debt due to suffering an injury or illness when they had no insurance, and sometimes it was caused by large co-pays over months or even years.
The good news is that medical bills, just like credit card debt and personal loans, are discharged in bankruptcy.
Tax Debt can be Wiped Out in Bankruptcy
Many people don’t know that taxes owed to the Internal Revenue Service and Franchise Tax Board (i.e. Federal and State taxes) can be discharged in bankruptcy. Under some circumstances even sales tax owed by a business owner can be discharged in bankruptcy. However, getting rid of taxes is much trickier than other types of debt, and the analysis for determining if a particular tax debt is going to be wiped out is complicated. For that reason, it’s especially important to have an experienced bankruptcy attorney assist you in preparing and filing your case if you have any tax debt.
Getting a Fresh Start in Bankruptcy
Because all types of debt can be wiped out in bankruptcy, filing Chapter 7 or Chapter 13 bankruptcy can truly give a person a fresh start. Getting rid of the burden of overwhelming debt and freeing up money to pay for necessities, or even future retirement, can be truly freeing.
For a free consultation about your options, call the Law Offices of Brian Barta at (707) 542-2844 or email to bartabk@sonic.net. Over the last 25 years I’ve helped literally thousands of residents of Sonoma, Marin, Napa and Lake counties file bankruptcy and get a fresh start.
