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Chapter 7 or Chapter 13 bankruptcy -- which debts will remain?

Florida consumers who are facing overwhelming debt may be researching potential remedies for their dilemmas. When considering bankruptcy, one of the common questions relates to which debts cannot be discharged. Although there are specific requirements to determine whether a person qualifies for Chapter 7 or Chapter 13 bankruptcy, the way debts are treated differ considerably between the two options.

In Chapter 7 bankruptcy, payments on secured debts such as car loans or mortgages must continue. Those assets could be liquidated to pay creditors, but most unsecured debts can be discharged. Other debts that will not be discharged include any spousal maintenance or child support court orders, most student loans, debts remaining from a previous bankruptcy filing and debts not listed in the petition that was filed for bankruptcy. Any criminal fines or penalties and debts related to DUI claims, most tax debts and those entered into after filing for bankruptcy will also remain the filer's responsibility.

In Chapter 13 bankruptcy, the debtor continues paying all debts according to a court-approved payment plan over three to five years. Unsecured debt balances at the end of that period might be discharged. The debts that will not be discharged include those linked to criminal cases or impaired driving charges, court-ordered child or spousal support, debts not listed in the repayment plan, or newly incurred debts and student loans. Fraudulent debts are not dischargeable in any bankruptcy filings.

When a person suffers financial setbacks and considers the available options, it may not be wise to rush into anything. A consultation with an experienced Florida bankruptcy attorney can bring clarity about the pros and cons of both Chapter 7 and Chapter 13 bankruptcy, and this may help in making informed decisions. A lawyer can assess the consumer's circumstances and provide valuable guidance and support focused on achieving renewed financial stability.

Source: superpages.com, "What Debts Are Liquidated in Bankruptcy?", April 27, 2017

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Paul Urich
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