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Bankruptcy: What debts can and cannot be discharged

Filing for bankruptcy in Pennsylvania is one of the best ways to deal with debts and have a clean financial start. Usually, the court will dismiss some of your debts to make things easier for you, but there are some debts you must pay. More on this below.

Types of bankruptcies

There are three main types of consumer bankruptcy: Chapter 13, Chapter 11, and Chapter 7. In a Chapter 13 bankruptcy, the court will create a payment plan for you to repay your debts over three to five years. This type of bankruptcy is also called a reorganization bankruptcy.

Chapter 7 bankruptcy, on the other hand, is also known as liquidation bankruptcy. In this type of bankruptcy, the trustee will sell some of your assets to repay your debts.

Non-dischargeable debts

Some debts can never be discharged in bankruptcy. These include:
• Child support
• Alimony
• Student loans in some cases
• Income taxes
• Court fines

The court believes that these debts are more important than all the others and must therefore be dealt with first. But if an extraordinary condition exists, such as a serious illness or disability, the court may discharge these debts.

Dischargeable debts

Debts that you may not have to pay after bankruptcy include:
• Credit card bills
• Medical bills
• Personal loans
• Lease agreements

Some of these debts, like credit card bills and medical bills, are unsecured debts. This means they are not tied to any asset, such as a car or house. Lease agreements and car loans may be secured. However, if you continue making payments as per the agreed bankruptcy case terms, you may be able to keep your assets.

You should note that failure to pay or adhere to bankruptcy terms can result in your case being dismissed. This will leave you with all the debts you had before you filed for bankruptcy and could damage your credit score.

Bankruptcy can be the perfect solution for you if you are riddled with debts and in need of a fresh start. However, depending on your goals, it’s helpful to understand the type of debts that can be discharged and which can’t.