Individuals with significant debts can get relief by filing for bankruptcy. However, bankruptcy is not an all-encompassing solution to your financial woes.
It is always a good idea to meet with a bankruptcy attorney before you file to discuss your options. This guide will help you understand what happens to your debts once you file bankruptcy.
Is Bankruptcy a Clearcut for Tax Debt?
When filing for bankruptcy, one of the most important questions is “Does bankruptcy eliminate tax debt?”
Both yes and no. A bankruptcy filing can be used to discharge certain debts. This is the main benefit of filing for bankruptcy.
However, bankruptcy will not erase all debts. Some payments may remain even after bankruptcy is filed.
What Debts Can Be Discharged?
Two of the most common discharged debts include medical bills and credit card debt. These are the two main types of debt that can lead a debtor to file for bankruptcy. When all other options have been exhausted, bankruptcy provides a way for individuals to eliminate these common debts.
A bankruptcy filing can also allow for the discharge of past-due utility bills. The debtor must still make scheduled utility payments even after filing.
Also, all utility debts that were accumulated prior to filing are discharged. However, filing for bankruptcy does not exempt an individual from future payments of utility bills.
When bankruptcy is filed, personal loans, business debts, certain lawyer fees, and claims for automotive accidents are usually discharged. One exception is when the debtor owes money for an alcohol-related car accident.
If the debtor is found to be under the influence of alcohol or drugs, car accident claims cannot be discharged.
Finally, bankruptcy can allow you to discharge your mortgage. Depending on the bankruptcy chapter filed, this could also result in the debtor losing their home.
This post was written by Trey Wright, a bankruptcy lawyer in Jacksonville FL with extensive experience! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.
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