If a consumer has too much debt they can’t pay, bankruptcy may allow them some relief. However, not all debts in Fort Lauderdale, Florida, can get discharged in bankruptcy.
Debts in Chapter 7 and Chapter 13 bankruptcy
Most filers opt to file Chapter 7, which is a liquidation process that requires selling nonexempt assets through an assigned trustee. Nonexempt assets include items that the court considers not needed for daily living, such as second homes, jewelry and artwork. The proceeds are divided among creditors, and the debt typically gets discharged in four to six months.
Chapter 13 is for filers who have sufficient wages to create a court-approved repayment plan. They commonly have three to five years to pay debt, and they won’t lose property as long as they make payments.
Only unsecured debts can get discharged in bankruptcy, such as credit card and medical debt, because no collateral is attached. However, there are many categories of non-dischargeable debt listed in the bankruptcy code, and some unsecured debts cannot get discharged. Some examples of non-dischargeable debt include:
- Domestic support payments
- Recent income tax debt
- Current utilities
- Current mortgage payments
- Debts from malicious and willful criminal acts
- Debts arising from DUI
These debts cannot get discharged because of public policy, interest in not letting them get dismissed and how they accrued. The court may view $725 or more of credit card purchases made within 90 days of filing as fraudulent unless the consumer can prove otherwise. If the consumer takes out a cash advance of $1,000 within 70 days of filing, it may not get discharged. Student loans usually do not get discharged, but they could if the filer can prove that paying them would cause an undue hardship.
While bankruptcy can erase several kinds of debt, it should be a last resort since it impacts credit for a number of years. Consumers may try to negotiate a plan to pay a lower amount or get a reduced interest rate.