Do You Get out Of All Debts if You Declare Bankruptcy?

This is a very common question we often get from potential clients. Let's face it - one of the primary reasons that people file for bankruptcy is to be legally released from as many debts as possible. If you do it right, the best result from bankruptcy is usually to have all of your debts legally forgiven by the federal government and at the same time also be allowed to keep all of the property and assets you own. That is precisely the number one goal that we hope to achieve for most of our clients.

So if you file a successful bankruptcy your goal is to obtain a "discharge", and this is the legal term used to mean that your debts have been wiped out - they no longer exist, and they are not going to be miraculously resurrected ever again. Here's a brief example of the type of debts that normally get discharged in a successful bankruptcy:

1. credit card debts,

2. medical bills - doctors, hospitals, dentists, chiropractors, surgeons, and all other medical providers,

3. utility companies - gas, electric, cable TV, telephone, internet, Comcast, Verizon, DirecTV, AT&T, etc.

4. personal loans, general unsecured loans such as One Main Financial, Best Egg, Prosper, credit unions, pay day loans,

5. old income taxes at least 3 years old - federal and state (special rules apply)

6. debts owing for overpayment of unemployment benefits or social security benefits (special rules apply)

7. driver license surcharges assessed by the Motor Vehicle Commission,

8. fees owing to lawyers and other professionals,

9. mortgage debts can be released for any deficiency if there has been a foreclosure (but if you want to keep your house, you're going to have to pay your monthly mortgage), and

10. deficiency balances on a repossessed vehicle can be released.

Of course, the laws also provide that there are certain debts that a normal bankruptcy will not discharge. These debts include:

1. child support,

2. alimony,

3. many student loans,

4. court fines,

5. income taxes less than 3 years old,

6. sales and use taxes and other fiduciary taxes

7. debts for death or personal injury caused by a person operating a motor vehicle while under the influence.

So there are certain debts that you are not going to discharge in a successful bankruptcy, but the vast majority of debts can usually be wiped out, and that should be enough for most people to get a fresh financial start.