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How are unsecured debts treated in Chapter 7 bankruptcy?

Most unsecured debts will be wiped out in a Chapter 7 bankruptcy.  Unsecured means that the debt does not have any property pledged as security.  This includes credit cards, medical bills, lines of credit, payday loans, overdraft protection, signature loans, and personal loans.  There are certain types of unsecured debts that cannot be eliminated in bankruptcy.  The two most common types of debt that people think cannot be done away with are student loans and taxes.  These can be wiped out, but only if you meet special circumstances.  Student loans are not wiped out in bankruptcy, unless you can prove that paying them would create an undue financial hardship for you or your family.  Income tax debts can be eliminated, under certain circumstances, if they are more than 3 years old before the date you file the bankruptcy.

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