The reason you choose to file bankruptcy is to get rid of your debt, so it’s important to know whether or not it actually does. Does bankruptcy clear all debt? The short answer is probably not. That “probably” is there because it does eliminate a lot of debt, and it’s possible that it will take care of all your debt, though that’s unlikely. Let’s take a closer look.
Different Bankruptcy Options
The two most common forms of bankruptcy are Chapter 7 and Chapter 13. You can file Chapter 7 if your median household income is equal to or below a certain level. For the state of Wisconsin, that amount is $67,355 (as of 2019). This type of bankruptcy takes between 3 to 6 months. Or you can file Chapter 13 bankruptcy, which has no income status requirement, but does have a cap on the amount of debt. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.
Whatever method of bankruptcy you choose to use, your unsecured debt will almost certainly be eliminated. Unsecured debt is debt you have incurred without having to put up collateral. So, for instance, all credit card debt is unsecured debt. So is medical debt. And any other obligation you have that you got simply through agreeing to pay it back. That gym membership that you can no longer afford, but that’s due to run another 2 years? That’s unsecured debt.
Your mortgage, your car payment, your home equity loan, these are all examples of secured debt. That doesn’t mean that you will lose your home and your car, however. Each type of bankruptcy has provisions to protect your most important assets. The professionals at Burr Law will be able to help you retain these kinds of essential items.
Money Owed to the Government
It’s extremely difficult to eliminate tax debt. There are a number of conditions that must be met in order for some tax debt to be included in those cleared through the bankruptcy process. The experts at Burr Law can work with your specific situation to see if it is possible to clear some of your tax debt. Any debt relating to tax fraud would not be exempt. It is virtually impossible to eliminate student loan debt. If your student loans are from the federal government or guaranteed by the federal government, you should be prepared for the likelihood that they will still be there once your bankruptcy is complete. Even money owed to local governments are difficult to clear through bankruptcy. If you’ve accumulated a hefty amount in traffic tickets, you’ll still need to pay that back.
Specific Personal Obligations
There are some particular personal obligations that bankruptcy will not eliminate. For instance, bankruptcy will not clear your child support payments or your alimony obligations. Similarly, if you have been involved in a personal injury or death as a result of DUI case as the defendant and are obligated to pay a settlement, that will still remain.
Bankruptcy is a great way to deal with most of your debt. However, it is unlikely to eliminate all of it. It’s crucial to work with experienced professionals in the field, like those at Burr Law, so that you can clear as much of your debt as possible.