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?
Let’s answer the first part of that question now: most forms of debt can be discharged through bankruptcy. This includes credit card debt, car loans, medical debt, rent that is part due, mortgage payments, and even utility bills that haven’t been paid in some time. However, the discharge process can’t do anything about student loans (unless the circumstances are extreme).
If you don’t discharge your debts, there is the possibility of your home being foreclosed or your car being repossessed. In these cases, the property could be sold at auction. When this is done, if the selling price doesn’t cover what you owe, then a “deficiency judgment” is declared and you will owe that difference. Be aware of these “deficiency judgments” and how they could affect you. Also, it is crucial to know that the discharge process can eliminate such deficiency judgment debts.
As always, if you have questions about your situation, please consult with an experienced bankruptcy attorney.