How does the release of debts work?

  • Chapter 7 Bankruptcy

Chapter 7 Bankruptcy and Release of Debts

Filing bankruptcy under Chapter 7 is usually with an objective of getting away with all or most unsecured debts. While it is a fact that Chapter 7 bankruptcy can help in releasing most debts secured and unsecured debts. It is also a fact that certain type of debts or liabilities do prevail even after Chapter 7 bankruptcy Los Angeles. Credit card debts pay day loans, etc., are some common unsecured loans that could be released with Chapter 7 bankruptcy.

How does the release of debts work?

A release of debt basically relieves an individual from the liability to repay the debt. It also prevents the lender from making any attempts to recover the debt. The debt has to be written off once released and legally there is no liability for the bankruptcy filer towards the creditors. A lien which has not been voided by the bankruptcy court prevails even after filing a Chapter 7 bankruptcy. This lien can be put to exercise by the lender in order to recover his/her debts. For instance, if you have not been able to keep up on your car loan payments, the lender can exercise the lien and sell/acquire the car and release you of any debt in return. You can also sign an affirmation agreement with a promise to settle dues in a specific time period to retain the car.

How does the release of debt procedure work?

Normally, the release is availed automatically or as we say is applied once the case is closed by the bankruptcy court. The release debt usually occurs within 60 days or 2 months of the creditors meeting. Roughly it would take about 120 days or 4 months for the debts to be released from the day you file your bankruptcy application. There are two kinds of debts which a filer can occur, and both have different consequences. They can be listed as follows-

  1. Pre-filing debts

Pre-filing debts as the name clearly suggest are debts that have been incurred before filing of bankruptcy. The court shall release all valid and qualified pre-filing debts for the bankruptcy filer after assessing and evaluating all the factors of consideration.

  1. Post-filing debt

These are debts which have been incurred after the bankruptcy has been filed. Since the duration for the debts to get released from the filing day could be about 4 months, there is the possibility of some bills and expenses to rack up during this period. The bankruptcy filer is completely responsible for these expenses and the bankruptcy court shall not release any of such debts.

What are some of the common debts that are discharged?

There are few types of common debts that can be released under the Chapter 7 bankruptcy code. These can be listed as follows-

  • Credit card dues
  • Collection agency dues
  • Medical bills
  • Personal loans from family members, friends, and fellow employees/employers
  • Utility bills pre-filing debts only
  • Bounced or dishonored checks
  • Repossessed deficiency balances
  • Lease agreement dues
  • Automobile accident claims unless until found guilty of drink and drive
  • Business Debts
  • Dues from civil court judgments
  • Penalties for underpayment/nonpayment of federal/state taxes and federal/state taxes
  • Social security overpayments
  • Veteran assistance loans
  • Attorney fees excluding child support and alimony fees

This is not an all-inclusive list. But it consists of the most commonly released debts. To learn more about other non-releasable debts, seek assistance about the release of debts, dial in +1 888-297-6203 now.


2019-07-23T12:48:52+00:00