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.
Secured creditors are creditors that have some type of property (ie. security) or collateral for the loan you owe. They have a lien on your property, which is an interest in property that allows a creditor to repossess that property if you don’t pay. Your mortgage company has your house as security for the mortgage loan. The auto finance company has your vehicle as security for the auto loan. The local finance company may have some of your furniture and household goods as security for the money they loaned you. These are all secured creditors.
Unsecured creditors are creditors who you owe money to, but they do not have the right to repossess anything if you don’t pay them. Credit cards, medical bills, signature loans, payday loans are some examples of unsecured debts.
Although there is not a limit on the number of bankruptcy cases you can file and no limit to the amount of time in between filings, there are limits to when you are eligible to receive a proper “discharge”. So why would you want to file a bankruptcy case if you know you cannot receive a discharge? There are several reasons why this strategy may be utilized. For example, say that you recently filed a chapter 7 bankruptcy and wiped out your unsecured debt but you have student loan or tax debt that is non-dischargeable. You could turn around and file a chapter 13 bankruptcy in order to be protected from garnishments, lawsuits, levies, etc relating to the student loans or tax debts for up to 5 yrs even though you would not receive a discharge.
Here are the time frames that must occur between filings for discharge eligibility (Note: the time is counted from date filed to date filed):
8 years between Chapter 7’s. -727(a)(8)
To review the various clips of attorney Frank Coxwell’s appearances on the Fox 40 AM Show, click here to go to our Media page. Mr. Coxwell discusses multiple topics on the show – the garnishment process, how to stop foreclosures in Mississippi, how to deal with student loans, the pitfalls of the new “business” credit card offers, and more.