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Will All My Debt Disappear When I File for Chapter 13?

Deciding that you would benefit from a bankruptcy filing is a big decision and an even bigger step. Most individuals head towards a Chapter 13 bankruptcy unless they have absolutely overwhelming debt. Should you follow the usual trend and also file for Chapter 13? It depends on what types of debt you have, as there are only certain kinds of debt that Chapter 13 will discharge, or “eliminate.”

Debts Discharged in Chapter 13 Bankruptcy

Chapter 13 will only discharge nonpriority unsecured debts, such as debt related to:

  • Credit cards: One of the most common reasons for filing for Chapter 13 bankruptcy is credit card debt. Thankfully, this type of debt is typically dischargeable in most any bankruptcy filing, including Chapter 13.
  • Medical bills: Heavy medical bills can be incurred after all sorts of medical procedures, especially those requiring hospitalization. If they cannot be easily repaid, they might be dischargeable.
  • Personal loans: Any personal loans you have arranged between yourself and loan agent, or even a third party, like a friend, can be discharged in Chapter 13 bankruptcy.
  • Outdated taxes: You might be able to discharge tax obligations still outstanding from several years in the past. Generally, you cannot discharge tax obligations from recent filings, though.
  • Certain liens: It might be possible to have a lien related to a mortgage or car loan stripped with a Chapter 13 filing. This procedure is best attempted with the help of a bankruptcy lawyer.

What is the Downside of Chapter 13 Bankruptcy?

With all sorts of common debts and obligations removed through Chapter 13, you might be wondering why you would not file for it. The “downside” of Chapter 13 is that it does not discharge your debt right away. Instead, you are expected to pay back a reduced amount of your debt across the next three to five years. What remains after you have made those repayments will be discharged if it includes nonpriority unsecured debts. The upside is you likely will not risk the seizure or repossession of your most valued property due to a Chapter 13 bankruptcy.

Do you have more questions about Chapter 13? Wondering if it is right for you? The Law Offices of Marshall D. Schultz and our Detroit bankruptcy attorneys are here to answer your questions and act as your legal guides. With us by your side, you can determine if bankruptcy is the correct choice and get started if it is. Call (888) 822-6730 to make the first choice for a fresh start.

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