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Dischargeable Debt

Dischargeable Debt

Dischargeable debt. What does that mean? Debt needs no definition. But dischargeable does. Dischargeable debt is debt that can be discharged by law. This means that the debt is eliminated. Normally this is done though the filing of bankruptcy. And once discharged, the debt can no longer be collected upon.

The reason people file bankruptcy is that they cannot afford to repay their debts. Filing bankruptcy allows their debts to be discharged. When a bankruptcy case is completed, a discharge is ordered. This means he bankruptcy judge issue an order. The order declares the debt is legally discharged. This means it is no longer owed. But only dischargeable debt can be eliminated. Or discharged.

Most forms of debt are dischargeable. But some are not. The most common forms of debt that are dischargeable include credit card debt, medical bills, car repossessions (or surrenders), foreclosures, past-due rent, social security and unemployment overpayment, and more. These are all types of dischargeable debt. They can all be eliminated through the filing of bankruptcy.

Some debts, though, are not dischargeable. Certain types of taxes are not dischargeable. For example, sales tax and employee withholding are types of debt that may not be dischargeable. So even if you file bankruptcy, you may not be able to eliminate these debts. There are forms of bankruptcy, Chapter 13 bankruptcy for example, where you can provide repayment plans for these debts. But none that eliminate them.

Income tax and student loans may be dischargeable debt. Stress on the may. Income tax can be discharged through bankruptcy. But the taxes must be old enough. There are other restrictions, too. But typically income taxes more than 3 years old can be discharged in bankruptcy. Student loans are another maybe. Typically student loans are not dischargeable. Even if you file for bankruptcy. But is you are in a hardship situation, as this US News Report & World Report article points out, you might be able to eliminate your student loans.

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Medical Bill Relief

Medical Bill Relief

Medical bill relief is a much needed commodity for many American consumers. This is especially so for surprise medical bills, as this Fortune Magazine article reports. The reason medical bills can cause such financial chaos is simple. Medical bill are expensive. Really expensive. And it is only getting worse.

Much of the need for medical bill relief is related to healthcare insurance changes. With the implementation of the Affordable Care Act (Obamacare), millions of Americans’ medical insurance plans changed. The changes typically involved higher costs and fees. With the increased costs came decreased coverage for many. This resulted in medical bills. Medical bills consumers thought were covered by their insurance. But they weren’t.

Ambulance bills, once considered covered by insurance, no longer were for many new medical insurance policies. An extra $1,500.00 for an unanticipated health emergency could soon result in a financial emergency. Medical bill relief for many became a must.

Medical bills are rarely welcomed or invited. But collection efforts for medical bills can be some of the most aggressive. Collection companies often contribute to the problem facing many in need of medical bill relief. Expensive medical bills are a problem. A big one. Pressure to pay these bills can be bigger. Lawsuits often result. Perhaps even a bigger problem.

What, then, can be done? Paying them is an option. But not a good option for most. Not paying them can leave you in peril. But this is the only option for too many. Bankruptcy may be the only option. But it is a good one. Medical bills are unsecured debt. This means they can be discharged in a bankruptcy. Discharged debts are eliminated. You are legally relieved of these debt. This is a big benefit to those in need of medical bill relief. Bankruptcy may not be anticipated. But neither may be medical bills.

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Bankruptcy Discharge

Bankruptcy Discharge

Bankruptcy discharge is the legal term applied to debt elimination through bankruptcy. Filing for bankruptcy and completion of a bankruptcy case allows filers to receive a discharge. The discharge is an order issued by the bankruptcy court eliminating debt. Here is the he full explanation of a discharge according to the United States Bankruptcy Court.

People filing bankruptcy are known as debtors. Creditors are the entities debtors owe when they file for bankruptcy. Debtors in need of debt relief list their creditors in their bankruptcy paperwork, or bankruptcy petition. Upon the completion of their case, debtors receive a bankruptcy discharge. The discharge legally eliminates the debtor’s debts. It’s that simple. Creditors who try to collect after a discharge has been ordered can be subject to penalty and sanctions as this news story suggests.

Not everyone is eligible to file bankruptcy. But those who are can eliminate, or discharge, their debts thought a bankruptcy filing. Limitations exist that may prevent some from filing bankruptcy and receiving a bankruptcy discharge. These impediments to a bankruptcy discharge may be previous bankruptcy filings, excess income or too much property. If eligible, though, a bankruptcy discharge order will result from a bankruptcy filing and successful case completion.

Just filing for bankruptcy alone will not result in a bankruptcy discharge. The bankruptcy case must be approved and completed. With a Chapter 7 bankruptcy this may mean a few months form filing to discharge. A debtor usually does not have to pay anything to his creditors in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, where a debtor does pay something to his or her creditors, this may mean a few years to obtain a discharge. Whatever the type of bankruptcy case, individual debtors receive a discharge at the successful conclusion of their case.

The bankruptcy discharge only applies to legally dischargeable debts. Not all debts can be discharged through bankruptcy. Student loans, criminal restitution and child support are common examples of debts that are not dischargeable.

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Discharge Student Loans?

Discharge Student Loans?

Can you discharge student loans in bankruptcy? Maybe soon you can. Eliminating student loans though bankruptcy is not normally allowed under the current bankruptcy code. Though student loan debt is unsecured, like credit card debt and medical bills, it is not treated the same. But times may be changing.

As this editorial piece for the Los Angeles Times reflects, perhaps now is the time to reevaluate whether you can discharge student loans. Student loan debt has skyrocketed over the last decade. So have college costs. Given the tuition increases over the same span it should not be a surprise for the spike in student loan debt.

College costs have exploded and, along with it, debt. College degrees, once considered financial bedrock, have not held their value compared to their costs. If your graduate from college you should earn more. Right? Often this is not so. At least when it comes to the inflated costs to get the degree. Earning $1,000 more per month does little good if that comes with a lifetime debt of $1,200 per month. The math doesn’t make sense. Perhaps, then, now is the time to evaluate whether you should be able to discharge student loans.

Student loan can be eliminated through a separate bankruptcy proceeding. It is a costly procedure. And it takes an extreme showing of hardship to rid yourself of the student loan debt. As I have often commented to clients, you would not want to be able to discharge student loan debt. To discharge student loan debt would not be worth the hardship it would require. Showing an inability to afford the debt is not enough.

Most debt that is discharged in bankruptcy requires, primarily, a showing of inability to afford the debt. Perhaps it is time now to apply this same standard to student loans.

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