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Can Chapter 7 bankruptcy get rid of your debt?

If you struggle with debt, you may not know where to turn. Sometimes, budgeting and negotiating with your creditors does not work out. As your bills pile up and your credit score tanks, you may need to think about declaring bankruptcy. Bankruptcy is an effective debt-relief method for many consumers like you who face overwhelming debt. 

But there are plenty of factors to consider before rushing into bankruptcy, including what kind of debt you want to eliminate. Here are some common types of debt you typically can and cannot discharge through Chapter 7 bankruptcy.

Dischargeable debts

According to Policygenius.com, bankruptcy can generally dismiss the following types of debt:

  • Credit card debt
  • Personal loans
  • Overdue bills in collection agencies
  • Medical bills
  • Overdue or unpaid taxes
  • Utility bills

Chapter 7 bankruptcy can generally erase unsecured debts. But there are plenty of other categories of debt that you may have trouble dismissing via bankruptcy. 

Student loans

More than 40 million people struggle with student loans in America, but bankruptcy cannot directly help with this burden in most situations. Unfortunately, private and federal student loans are exempt from bankruptcy. 

Secured debt

In most cases, bankruptcy cannot eliminate debts backed by collateral, such as a mortgage or car loan. The collateral still belongs to your creditors, so you will likely either need to find a way to make payments or give them back.

Divorce support payments

Alimony and child support payments are not eligible for a bankruptcy discharge. These debts are legal support obligations and do not tend to hold up in bankruptcy cases. 

New debt

Once you file for bankruptcy, you may assume you can use your credit card on a whim to make frivolous purchases. However, the debt you incur after your filing will not count and you will only be hurting yourself. 

While Chapter 7 bankruptcy may not be able to terminate all of your debt, it can give you what you need to have a fresh start.

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