Empty Wallet

What Kind of Debt Can be Resolved?

Many people in America find themselves buried in debts that they can no longer handle. When you’ve reached the point that you have little hope of catching up, you may start considering filing for bankruptcy.  Before you do, it’s important to know how declaring bankruptcy works and what it can (and cannot) do for your financial situation. Here’s a closer look at how both chapter 7 and chapter 13 bankruptcy work.

Filing for either type of bankruptcy will enact the automatic stay, which prohibits creditors from taking actions to collect their debts, including calls, letters and potential lawsuits.  When you declare Chapter 7 Bankruptcy, most of your unsecured debt (such as credit cards) will be cleared, and you’re typically allowed to keep at least some of your assets to help you rebuild your finances.  Although filing for bankruptcy stays on your credit report for 7-10 years, because you’re discharging a large portion of your debts, you can start improving your credit rating immediately.  

Unsecured Debt

Bankruptcy is most commonly used for wiping out credit card debt.  Your credit card balance is an unsecured debt (it’s secured only under special circumstances), which means that the creditor does not have a lien on any property of yours and cannot repossess anything.  There are other types of unsecured debts that are also wiped out by filing Chapter 7 bankruptcy, such as:

  • credit card charges (including overdue and late fees)
  • collection agency accounts
  • medical bills
  • personal loans from friends, family, and employers
  • utility bills (past due amounts only)
  • auto accident claims (except those involving drunk driving)
  • business debts
  • money owed under lease agreements (includes past due rent)
  • social security overpayments, and
  • veterans assistance loans and overpayments.

Consult a Debt Resolution Attorney.  

There are a lot of facets that will determine whether filing for bankruptcy is right for you, and which type of bankruptcy will serve your needs.  Speaking to an experienced bankruptcy attorney can help you determine if declaring bankruptcy is the appropriate move.  The attorney can discuss your options with you, and if you do file, the attorney will also ensure that your property is protected, that you’re released from all of your dischargeable debts and that creditors do not violate your rights.


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