Types of Bankruptcy. Personal Bankruptcy. Corporate Bankruptcy. Bankruptcy: Your Legal Rights. Bankrupty Terms C-I. Bankrupty Terms J-Z. Key Takeaways If you file for Chapter 7 or Chapter 13 bankruptcy, then the court may discharge some of your debts. Discharge means you are no longer responsible for repaying the debt, and the creditor can no longer attempt to collect from you.
Certain debts, however, are not eligible for discharge, and some can be discharged only in rare cases. Important If you have income tax or student loan debt, then you may be able to negotiate a workable repayment plan without filing for bankruptcy. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.
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This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Debt Management When to Declare Bankruptcy. Debt Management Bankruptcy Rates by State. Partner Links. Related Terms Bankruptcy Definition Bankruptcy is a legal proceeding for people or businesses that are unable to repay their outstanding debts.
Bankruptcy Court Bankruptcy court is a specific kind of federal court that deals with bankruptcy. Bush as a move to reform the bankruptcy system.
Proof of Claim A proof of claim is a form submitted by a creditor in order to receive money from a debtor who has filed for bankruptcy. Bankruptcy Discharge A bankruptcy discharge is an order that releases a debtor from personal liability for certain types of debts.
Debt Discharge Debt discharge is the cancellation of a debt due to a bankruptcy and can result in taxable income to the debtor unless certain IRS conditions are met. Investopedia is part of the Dotdash publishing family. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. Measure content performance. Develop and improve products.
List of Partners vendors. Managing Your Debt Bankruptcy. Part of. What Is Bankruptcy Overview Background. Bankruptcy Types. What Comes Next? By LaToya Irby. LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. Learn about our editorial policies. Reviewed by Somer G. Article Reviewed February 24, Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years.
Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. Learn about our Financial Review Board. Article Sources. Part Of. Your Privacy Rights. Student loans can be discharged in bankruptcy only if you can show that repaying the loan would cause you "undue hardship," which is a very tough standard to meet. You must prove that you can't afford to pay your loans currently and that there's very little likelihood you can do so in the future.
Find out more about the undue hardship standard and student loan debt in bankruptcy. Eliminate most tax debts. Eliminating tax debt in bankruptcy isn't easy, but it's sometimes possible for older unpaid tax debts. Learn what's needed to eliminate tax debts in bankruptcy. Eliminate other nondischargeable debts. The following debts aren't dischargeable under either chapter:.
If you file for Chapter 7, these debts will remain when your case is over. In Chapter 13, you'll pay these debts in full through your repayment plan. Debt related to fraud might get eliminated. A fraud-related debt won't be discharged if a creditor files a lawsuit called an adversary proceeding and convinces the judge that the obligation should survive your bankruptcy.
Such debts might result from lying on a credit application or passing off borrowed property as your own to use as collateral for a loan. Find out more about bankruptcy fraud.
This article provides an overview of the bankruptcy process only. Filing for bankruptcy is complicated, and the information provided here is not exhaustive. You can learn more about what bankruptcy can do for you by speaking with a local bankruptcy lawyer, or, for a more in-depth explanation of both Chapter 7 and Chapter 13 bankruptcy, see The New Bankruptcy by Attorney Cara O'Neill.
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Grow Your Legal Practice. Meet the Editors. What Bankruptcy Can and Cannot Do. Bankruptcy is a powerful tool for debtors, but some kinds of debts can't be wiped out in bankruptcy. Read on to learn more about: what you can expect in both Chapter 7 and Chapter 13 the benefits offered by Chapter 13 alone, and things that can't be accomplished by filing for bankruptcy.
What Bankruptcy Can Do Bankruptcy allows people struggling with debt to wipe out certain obligations and get a fresh start. Here are some of the things you can expect regardless of whether you file for Chapter 7 or Stop Creditor Harassment and Collection Activities Once you file, the court puts in place an order called the automatic stay. Stop a Foreclosure, Repossession, or Eviction at Least Temporarily The automatic stay will stop these actions as long as they're still pending.
An eviction that's still in the litigation process will come to a halt after a bankruptcy filing. But the stay will likely be temporary. Keep in mind that if your landlord already has an eviction judgment against you, bankruptcy won't help in the majority of states. Learn more about evictions and the automatic stay. Foreclosure and repossession.
Although the automatic stay will stop a foreclosure or repossession, filing for Chapter 7 won't help you keep the property. If you can't bring the account current, you'll lose the house or car once the stay lifts. By contrast, Chapter 13 has a mechanism that will allow you to catch up on past payments so you can keep the asset.
Find out more about bankruptcy's automatic stay and foreclosure and car repossession and bankruptcy. Wipe Out Credit Card Debt and Most Other Nonpriority Unsecured Debts Bankruptcy is very good at wiping out unsecured credit card debt , medical bills, overdue utility payments, personal loans, gym contracts.
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