What Debts Bankruptcy Can and Cannot Eliminate
Filing for bankruptcy in Las Vegas can wipe out a surprising number of common consumer debts, but it is not a magic wand that eliminates all financial obligations.
Understanding what debts can and cannot be erased is crucial to having realistic expectations about how bankruptcy will affect your financial life.
In bankruptcy, there are dischargeable debts, such as credit card balances, medical bills, and unsecured personal loans, that are cleared after bankruptcy and debts that survive the process, including child support, alimony, and certain tax obligations. The discharge process varies by chapter, with Chapter 7 generally eliminating unsecured debts while allowing certain secured debts to remain, and Chapter 13 potentially offering relief on some secured obligations through repayment plans.
To determine if bankruptcy is right for your situation, consult with a qualified bankruptcy attorney in Las Vegas who can review your specific debts and explain how a filing might impact your financial future.
Debts That Are Typically Dischargeable in a Nevada Bankruptcy
Chapter 7 and Chapter 13 bankruptcy can both eliminate certain types of debt. Here is a list of the most common types of debt that can be discharged in bankruptcy:
- Unsecured Debts: Debts that are not secured by property, such as credit card debt, personal loans, and medical bills, are often dischargeable in bankruptcy.
- Credit Card Debt: Unsecured debts from credit cards, medical bills, and other consumer debts are typically dischargeable in bankruptcy.
- Medical Debt: Medical bills and healthcare costs are generally dischargeable in bankruptcy.
- Personal Loans: Personal loans from friends, family, and other individuals are often dischargeable in bankruptcy.
- Utility Bills: Past-due utility bills and phone bills are often dischargeable in bankruptcy.
- Repossession Deficiency Balances: Debts owed for the difference between the value of a property and the amount owed on a loan after repossession or foreclosure are often dischargeable in bankruptcy.
- Old Tax Penalties: Old tax penalties and unpaid taxes can be dischargeable in bankruptcy.
- Government Program Overpayments: Government program overpayments, including welfare, Social Security, and veterans’ assistance programs, are often dischargeable in bankruptcy.
- Business Debts: Business debts are often dischargeable in bankruptcy.
- Past-Due Rent: Past-due rent and money owed under lease agreements are often dischargeable in bankruptcy.
- Civil Court Judgments: Most civil court judgments are dischargeable in bankruptcy.
It’s important to note that some of the listed dischargeable debts can actually survive bankruptcy depending on your specific circumstances, so it’s important to speak with a bankruptcy attorney first to understand which debts stay and go in your bankruptcy.
Debts That Survive Bankruptcy
Not all debts are dischargeable through bankruptcy. Some debts survive bankruptcy, and you’ll still owe them. This includes:
- Child support and Alimony: Debts related to family support are always non-dischargeable.
- Student Loans: Unless you can prove repayment would cause an undue hardship, these debts are non-dischargeable.
- Recent Income Taxes: These debts are generally non-dischargeable.
- Debts from Fraud, Theft, or Embezzlement: These debts are non-dischargeable.
- Court-Ordered Fines, Penalties, or Restitution: These debts are non-dischargeable.
- Most Tax Debts: Some older tax debts may be dischargeable, but most are not.
- Debts Arising Out of Tax-Advantaged Retirement Plans: These debts are non-dischargeable.
- Condo or Cooperative Housing Fee Debts: These debts are non-dischargeable.
- Debts That Were Not Listed in Your Bankruptcy Petition: Unless the creditor learns of your bankruptcy case, these debts are non-dischargeable.
Knowing that debts survive bankruptcy is crucial to deciding whether or not to file, as if you only have non-dischargeable debts, bankruptcy probably isn’t an option for you.
Why You Should Seek Legal Representation During the Bankruptcy Process
The bankruptcy process is highly regulated and requires strict adherence to legal requirements. An experienced bankruptcy lawyer in Las Vegas will ensure your case meets all the necessary legal requirements, maximizing your chances of achieving a successful discharge of debts.
By navigating complex legal issues, protecting your rights, and avoiding common mistakes, a Las Vegas bankruptcy lawyer ensures you get the full benefits available under the law. From reducing creditor harassment to maximizing debt discharge and protecting your assets, legal assistance is invaluable in making the bankruptcy process smoother and more effective.
Types of Bankruptcy Available to Las Vegas Residents
Las Vegas residents may file for bankruptcy under two main chapters of the U.S. Bankruptcy Code:
- Chapter 7 Bankruptcy: This type of bankruptcy, known as a “liquidation” bankruptcy, is designed for individuals with little or no income. In this type of bankruptcy, most unsecured debts are eliminated, and non-exempt assets may be sold to repay creditors.
- Chapter 13 Bankruptcy: This type of bankruptcy is designed for individuals with regular income, and it allows for the reorganization of debts into a court-approved repayment plan over a period of three to five years.
Eligibility for these types of bankruptcy depends on several factors, including income, assets, and debts. Additionally, there may be other types of bankruptcy available for specific situations, such as Chapter 11 for businesses and Chapter 12 for farmers or fishermen.
However, most Las Vegas residents go with a Chapter 7 or Chapter 13.
Chapter 7 Liquidation
Chapter 7 bankruptcy is often the quickest option for debtors who don’t have many assets or regular income to repay their debts. In this type of filing, a trustee is appointed to liquidate the debtor’s non-exempt property and distribute the funds to creditors. After the liquidation process, most unsecured debts, such as credit card balances or medical bills, are discharged.
Chapter 7 also provides a fresh start, giving the debtor a chance to rebuild their financial life.
However, filing for Chapter 7 requires meeting specific requirements, such as having an income below the median based on family size. If you’re considering Chapter 7, it’s highly recommended to consult with a bankruptcy attorney who can help you understand your rights, options, and eligibility.
Chapter 13 Repayment Plans
Chapter 13 bankruptcy is an alternative to Chapter 7 bankruptcy. Chapter 7 bankruptcy liquidates your assets, potentially including your home and car, to pay off your debts. Chapter 13 bankruptcy allows you to keep your home and car and catch up on your debts over time through a repayment plan spanning three to five years.
The main advantage of Chapter 13 is that it allows you to keep your assets and catch up on your debts. This is especially beneficial for those who are facing foreclosure or repossession.
