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Does Chapter 7 bankruptcy wipe your slate completely clean?

Many people enter bankruptcy proceedings because something has gone wrong with their financial state and a clean slate is needed. From sudden changes in financial holdings or real estate values to unexpected medical bills, finances can change quickly. Bankruptcy is a good tool for setting things straight again. Chapter 7 bankruptcy is a great way to wipe your debt away and move into the future. But it doesn't always wipe the slate perfectly clean.

A number of debts remain following a Chapter 7 bankruptcy. Which debts remain sometimes depends on the way a bankruptcy case is handled. For example, debts must be listed on the bankruptcy schedules or petitions to begin with. They can't always be added at a later date, which makes gathering accurate information important.

Some debts are not normally dischargeable in a bankruptcy, so they can't be listed. Student loans, alimony, child support, certain taxes and debts related to personal injury lawsuits won against you are also not usually dischargeable in a bankruptcy. In some cases, student loans and other types of debt might be discharged if you can show that making payments on them would cause an undue hardship -- even if payment structures were changed.

Debts that were considered under previous bankruptcies and were not discharged at that time might not be allowed under a new bankruptcy. Also, if you own fees to a condo organization or pension plan, those are not likely to be discharged in Chapter 7 proceedings.

Understanding which debts will be allowed in a bankruptcy proceeding is important to the proceeding and the overall decision to file. Working with a professional to review your financial status can help you make a determination whether bankruptcy is the right debt relief option.

Source: FindLaw, "Debts that Remain After a Chapter 7 Discharge," accessed Sep. 08, 2015

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Dan R. Dodds Dan R. Dodds

At the Dodds Law Firm, I focus my practice on the needs of individuals who have suffered losses because of abusive, deceptive or unfair conduct by others. I also provide comprehensive counsel in all matters related to Chapter 7 and Chapter 13...Read More

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