Are all of my debts dischargeable during a Chapter 7 bankruptcy?
- Dischargeable debts are unsecured debts such as credit cards, medical bills, and personal loans. "Unsecured" means that there is no lien on an asset.
"Secured" debts are those that "guarantee" payment of debt with a lien such as a mortgage on a house or a lien on your car. You can get rid the debt only if you give up the house or car.
However, second and third mortgages that are no longer secured by the value of a house may be discharged. They are no longer secured and become in essence, dischargeable personal loans.
- Some unsecured debts are not dischargeable for overriding public policy reasons. For example, child support, criminal restitution and fines, student loans, most tax debts are not dischargeable in bankruptcy.
If you have high non-dischargeable debt, it may be better to file bankruptcy under Chapter 13, even if you qualify for Chapter 7. Under Chapter 13, you'll get a stretch out of payments over 3 to 5 years and you may be able to negotiate better terms such as no interest.
Under Chapter 7, there is no payment stretch out; you have to keep up with payments or be subject to garnishments and lawsuits.