What debts can bankruptcy discharge?

Mounting debts can make anyone’s life difficult. While you likely want to repay yours, you may lack the ability to. Yet, you may fear that some of your debts do not qualify for discharge. This may be the case, but it depends on the debts you have and the type of bankruptcy you file.

Chapter 7 bankruptcy

You will discharge most of your unsecured debts if you file Chapter 7 bankruptcy. These debts have no collateral backing them, and may include credit card bills, medical bills, utility bills and personal loans. Certain secured debts – which have collateral backing them – can receive discharge through Chapter 7 as well. Yet, this arrangement allows your bankruptcy trustee to take the property you owe money on to repay your creditors. You may be able to keep these assets, though, if Tennessee’s bankruptcy exemptions cover their value or equity.

Some unsecured debts, though, cannot receive discharge through Chapter 7 bankruptcy. These may include:

  • Alimony and child support
  • Debts stemming from a divorce settlement
  • Debts stemming from fraud
  • Debts stemming from luxury purchases
  • Recent tax debts
  • Student loans

Chapter 13 bankruptcy

If you file Chapter 13 bankruptcy, you will satisfy your creditors through a repayment plan. You will follow this plan for three to five years, until you meet its terms. While your plan will not eliminate your debts outright, you will receive a discharge once you complete it, releasing you from most unsecured debts you have not paid in full. And it will allow you to keep important assets, like your vehicle and home, during bankruptcy proceedings.

As you consider filing bankruptcy, it’s crucial to consider which chapter allows you to eliminate your debts in a manner that reflects your needs. By acknowledging your unique circumstances, you can take the steps you need to achieve financial stability.