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Which debts can you erase through bankruptcy?

It's at the point where you don't even want to open the mailbox anymore. If it's not jammed with new bills, it's filled with collection notices and letters threatening repossession, eviction and other serious consequences. You know you need to do something to stop the spiraling debt, and you've heard that bankruptcy can provide relief, but does it actually erase all your debts?

The good news is that bankruptcy does erase or "discharge" a wide array of debts. Exactly how much debt you can eliminate will depend mainly on three things:

  1. Your personal financial situation
  2. Whether you file Chapter 7 or Chapter 13
  3. Whether your debts are secured or unsecured

Unsecured debts are the easiest ones to get rid of. They can also be some of the most expensive ones, so it's a win-win for you. Unsecured debts typically include:

  • Medical bills
  • Credit card debts
  • Utility bills
  • Many personal loans

Secured debts are much more difficult to discharge, because a creditor has the right to take a piece of property in exchange for the debt. Home mortgages and car loans are the most common types of secured debts. If you fail to pay, your lender can claim the house or vehicle.

The U.S. Courts points out that the following types of debts are also nondischargeable in most situations:

  • Federal student loans
  • Many back taxes
  • Overdue spousal support or child support payments

Erasing Some Debts Can Make It Easier To Repay Others

Even though you may not be able to eliminate all your debts, getting rid of the ones that you can is always beneficial. If you are behind on your car payments and you have thousands of dollars of credit card debt, for instance, eliminating the credit card debt may make it possible to keep your car.

Get personalized legal counsel by talking with an experienced bankruptcy attorney in your area. It is possible to make your financial life better and find freedom again.

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