If I file for Chapter 7 will I be able to have all my debts cancelled?
For those who qualify, Chapter 7 bankruptcy can provide the debt relief they have been searching for; however, not all debts can be discharged through bankruptcy. While many types of loans can be discharged, such as credit card debt, medical bills, and personal loans, others will remain your responsibility even after the process is complete. You will still be responsible for such debts as student loans, most taxes, fines, child support payments, and alimony payments.
If you are considering filing for Chapter 7, you must be fully informed of the regulations and qualifications involved in the process. In some cases, a debtor will run up their credit cards on expensive purchases before filing for bankruptcy, thinking they will be able to discharge this debt through Chapter 7. The court, however, will examine your purchases leading up to the filing, and any such debt will not be eligible for discharge. This can be very damaging to your case and your finances, as the court will likely consider these actions as fraud.
Chapter 7 is not the right solution for some individuals and families, as the creditor must be able to pass a means test before filing. The means test is used to determine whether the individual is truly in need of this bankruptcy protection, and involves a two-step analysis of your financial situation. First, your monthly income will be compared to the median income for your state, and if your income level is lower than the state average, you will move on to the next step. The second step involves taking certain deductions from your current income in order to determine a figure of your disposable income. If your disposable income is less than the limit designated by the bankruptcy code, you will have the option of filing for Chapter 7 relief.
Every situation is unique, so it is important to speak with an attorney about your specific circumstances to determine whether Chapter 7 can help address your debt.
This answer does not constitute legal advice, which can only be rendered after a full consideration of the facts of your case which is not possible in this format; nor establish an attorney-client relationship, which can only be done after you and an attorney meet and agree on the terms of that relationship. This answer is intended solely to provide general information about the justice system. Further, it does not provide the basis for making decisions about a course of action. Before making any decisions about a course of action readers are strongly encouraged to contact a lawyer and secure an attorney-client relationship. Readers must also understand that this format does not provide for confidential communication. Moreover, links to information on this site are for your convenience only and are not an endorsement or recommendation of those sites, and no responsibility is taken for any information at these linked sites, nor makes any representation or warranty with respect to these sites or the information contained therein.