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The discharge process: which debts are eliminated?

When you file for bankruptcy, one of the most important parts of the process is the debt discharge process. This stage of the bankruptcy will see many of your debts eliminated, and your creditors will no longer be able to go after that debt. Chapter 7 heavily relies on the debt discharge process, while Chapter 13 is more focused on the debt reorganization process and implementing a new payment plan.

But what debts can be discharged during this process, and how should you respond to this debt discharge in the time that follows your bankruptcy?

Your home can be protected from foreclosure thanks to bankruptcy

There are few assets that could even be considered more valuable than your home. Sure, your car and some valuable family heirlooms hold value, but your home is the place where you feel comfortable. It's where you live. It's where you raised your kids. Losing your home is disorienting in a way that few other things could ever be.

So when you fall on tough financial times, losing your home will be at the top of your concern list. Thankfully, if you have immense debt and you need to file for bankruptcy, the bankruptcy process can save your home from foreclosure.

Dying isn't as scary as credit card debt to younger generation

Credit card debt is a scary factor in the lives of many people all across the country. But is it the scariest thing you can think of? According to a new survey done by the website Credible, people aged 18 to 34 who carry credit card debt see their debt as the scariest part of their daily lives. It ranked higher than climate change, the threat of war, and even dying. That's an eye-opening realization about how younger generations see credit card debt.

With Americans holding more than $1 trillion in debt and the average debt of the survey's respondents at $5,290, it is clear that there are serious problems with credit card debt in this country. But the incredible reveal here -- that credit card debt scares younger generations more than anything -- leads us to believe that bankruptcy still carries such a negative reputation that people feel as though it isn't a viable strategy to deal with debt.

The short and long term impacts of bankruptcy

Given the complexities of bankruptcy and the fear that many people feel about the process, there are two common questions that people have when they discuss the issue with an attorney. The first is "what are the legal and logistical processes for a bankruptcy filing?" The second is "what impact will the bankruptcy have on my life, both immediately and well into the future?"

We've answered many matters related to the first question in recent weeks, so today we turn our attention to the second question: what impact will the bankruptcy have on my life, today and years from now?

Understanding the bankruptcy means test

If you are considering filing for bankruptcy and have begun researching the process involved in doing so, you may have come across the term “means test,” and you may be wondering what it is and what it entails. Essentially, the bankruptcy means test determines whether you may file for debt forgiveness through a Chapter 7 bankruptcy or whether you must do so through a Chapter 13 bankruptcy, which involves restructuring existing debts.

If you undergo a bankruptcy means test, you can expect a close review of your income, your current expenses and your family size to determine your ability to pay back your debts.

Exemptions can protect your home and car during bankruptcy

Bankruptcy comes with a lot of unknowns, and for people who are going through the process for the first time, they will understandably wonder if their assets are at stake during the bankruptcy. In some cases, your assets may be at risk. Usually smaller assets will be liquidated during bankruptcy. However, under Louisiana law, you are able to make certain assets exempt during the bankruptcy process. Your home and car are two of the big examples in this regard.

These exemptions are for Chapter 7 bankruptcy fillings, where liquidation is a critical part of the process. For Chapter 13 filings, which do not include the liquidation process, the exemptions are not needed. Homes, cars, and other major assets are often spared under Chapter 13 bankruptcy.

When to consider filing for bankruptcy

If you are like a multitude of other Americans, the day may come when you find yourself facing overwhelming debt and begin asking yourself whether filing for bankruptcy could provide you with some sense of relief. You may, too, like many others, feel hesitation in taking the next step, whether because you feel there is a stigma attached to filing, or for another reason entirely.

Bankruptcy protection exists for a reason, however, and if you have not been able to get a handle on your finances through other methods, filing for bankruptcy may prove a smart move. In particular, you may find it beneficial to file for bankruptcy if you find you:

Be wary of debt consolidation scams

Carrying debt will do funny things to your mind. People who would normally make calm, rational decisions starting making rash choices in an effort to eliminate the debt from their lives. Many people are like this, and they don't deserve ridicule for it because debt truly is a powerful, stressful force on a person's life. It is why you see so many television ads and hear so many radio ads by payday loan companies and debt consolidation businesses. These companies prey on the anxiety of people who are in debt.

They sell them a quick fix, one that on the surface may seem like a good deal at the time, but as time goes on that deal gets worse and worse. Eventually, it isn't a fix at all. The money they were loaned or the debt they somehow consolidated explodes into even worse debt.

Filing for Chapter 7 bankruptcy grants you many benefits

One of the terrible things about debt is that it can lead to many people falling into an endless spiral. It makes people desperate, and they may choose to take certain actions that only make their situation worse. A perfect example of this is when someone is in debt and they start accumulating (and using) credit cards in an effort to get out of debt. But in the end, they just make their unfortunate situation even worse.

Spiraling debt is a terrible financial state, and it can leave people in precarious positions. Their wages could be garnished; they could find that their assets or property are repossessed or foreclosed on; and creditors may go to great lengths, even illegal lengths, to secure the debts that they are owed.

Discussing Chapter 13 requirements

Everyone who files for bankruptcy has to qualify for the particular chapter that they file for. With Chapter 13 bankruptcy, the requirements are a little different than that of Chapter 7. And Chapter 7 bankruptcy requirements are different than Chapter 11 requirements. And so on and so forth.

Today, let's just focus on the requirements for Chapter 13 bankruptcy, which is often referred to as the "consolidation" option of bankruptcy. This is because the central pillar of Chapter 13 bankruptcy is the reorganizing of your debts and the repayment plan that you will agree to before finalizing your bankruptcy. This allows you to repay your creditors under new terms.

McBride Law Firm

McBride Law Firm
301 Jackson Street Suite 101
Alexandria, LA 71301

Phone: 318-625-0471
Fax: 318-445-8066
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