Beebe and O'Neil

What debts can you discharge through Chapter 7 bankruptcy?

Every month, people across the state of Connecticut find themselves falling behind on their bills. Financial issues can arise for a variety of reasons. Sometimes, getting into a car accident can leave you unable to work while you also have to deal with medical bills. For other people, the sudden loss of a job could mean financial woes are in their future. Divorce or diagnosis with a serious medical condition, like cancer, can also result in financial hardship.

Regardless of what happened, once you find yourself unable to make minimum monthly payments on all of your outstanding accounts, your creditors will likely start to become aggressive. You might start getting threatening phone calls or ominous letters. In some cases, your creditors could even initiate civil lawsuits against you to garnish your wages or otherwise obtain a judgment for repayment.

If you find yourself dealing with financial issues, it may be time to consider whether Chapter 7 bankruptcy can help. Despite the negative connotation people have for bankruptcy, it can actually be beneficial for people who have fallen behind with their financial responsibilities.

Chapter 7 bankruptcy offers discharge for those who qualify

For those experiencing significant issues with money and debt, Chapter 7 bankruptcy is often a source of relief. So long as you qualify for Chapter 7 bankruptcy, you will receive an automatic stay as soon as you file your initial petition with the court. That will stop all further attempts to collect on the debts covered by your bankruptcy.

After you go through all the necessary court proceedings, you will also benefit from the discharge of your unsecured debts. However, not everyone can qualify for Chapter 7 bankruptcy. You will have to pass a means test, which will involve comparing your adjusted income over the last six months to the median or average income in Connecticut. There are also limits on what assets you can have when filing Chapter 7 bankruptcy. Provided that you do qualify, it can offer you a fresh financial start.

Know what debts qualify for discharge in Chapter 7

Not all debts are eligible for discharge in Chapter 7 bankruptcy. Specifically, any secured debts you may have, such as a mortgage or a vehicle loan, will not just go away. Instead, the lender can choose to repossess those items unless you reaffirm the debt. Credit cards and similar unsecured debts, including medical debt, are typically eligible for discharge in Chapter 7 bankruptcy.

In most cases, student loans are not eligible for any form of bankruptcy discharge unless the school has lost accreditation or never had it before you obtained your student loan debt. If you find yourself struggling to make your monthly payments on credit cards or medical bills, it may be time to consider if Chapter 7 bankruptcy is an option in your case.

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