Cunningham, Chernicoff & Warshawsky, P.C.

Call to Schedule Your Initial Consultation

As of May 29, 2020, Dauphin County, where our office is located, has moved from Red to Yellow status. Our office will re-open on June 1, 2020. Until further notice, Stay Safe Guidelines will be followed, including safe social distancing (6 feet), cleaning after each client and the wearing of masks by employees and clients at all times while in our office. People who are ill and those without masks will not be permitted entry into our office.

Does Chapter 7 discharge all debts?

A debt situation could become so overwhelming that paying off obligations appears impossible. Filing for bankruptcy becomes a strategy the debtor may find necessary. Each bankruptcy case comes with its unique particulars, and some may find Chapter 7 preferable. However, Pennsylvania residents looking for Chapter 7 protections must realize not all debt is eligible for a discharge ruling.

Chapter 7 and discharging debt obligations

Chapter 7 bankruptcy entails liquidating non-exempt assets and paying off creditors. Some debts become discharged, which is to say the courts wipe away the debts. For example, if $4,000 in credit card debt ends up discharged, the credit card company loses its claim to recover the money owed.

Many bankruptcy filers prefer Chapter 7 over Chapter 13 since Chapter 7 does not involve any repayment plans. That said, persons who believe all debts under Chapter 7 may end up discharged would not be accurate. Some debts don’t go away regardless of filing for bankruptcy.

Discharged debt vs. non-discharged debt

A struggling debtor may benefit from learning what types of debts may be discharged, which ones won’t, and what “gray areas” exist.

Unsecured debts, such as credit cards or loans, along with medical bills, and utility payments, may face a discharge. Secured debt, like a car loan, may require renegotiation or returning the property.

Debts that remain include the past three years of tax debt, although a taxpayer may become freed from obligations older than three years. Student loan discharges are difficult to procure but might be possible when experiencing significant hardships.

Then there are those debts that someone won’t escape. Anyone owing fines for criminal convictions will find the bankruptcy courts provide no assistance. Alimony, child support, and other divorce-incurred debt judgments don’t factor into Chapter 7 discharges. Personal injury claims from DUI incidents are also outside a bankruptcy court’s discharge jurisdiction.

Performing research into what is or isn’t dischargeable seems worthwhile. Discussing a debt situation with a bankruptcy attorney could provide the insights necessary to choose the appropriate step. Some clients may opt for Chapter 13 after the discussions.