There are many different types of consumer debt. They can essentially be broken down into two categories — secured debt and unsecured debt. Here’s what you should know about the different kinds of debt and how to get legal help when you’re overwhelmed by what you owe.
Secured debt includes certain types of debt that cannot be discharged in bankruptcy, usually because the federal government is the entity owed and debt forgiveness is not available. Although secured debt cannot usually be discharged, bankruptcy can help buy you some time to get back on track with payments or ask to have your payment plan adjusted to reflect your income.
Student loans are more likely to be put on forbearance or restructured instead of discharged. In very rare cases, student loan debt can be dismissed if you can show repaying them would cause you and your family undue financial hardship now and your circumstances are not expected to change.
Tax debt is rarely dischargeable, even under a Chapter 7 bankruptcy. For tax debt to be dismissed, the following must be true:
- You did not commit tax fraud and filed a tax return
- The taxes you owe are income taxes
- Your tax debt is a minimum of three years old
- The IRS either hasn’t assessed your tax debt yet or has assessed it at least 240 days prior to filing for bankruptcy
Unsecured debt includes certain types of debt that can be and often are discharged in bankruptcy, simply because the petitioner does not have the disposable income to make the payments and doesn’t expect to within the foreseeable future.
Credit Card Debt and Medical Bills
Credit card debt and outstanding medical bills are among the most common types of unsecured debt that are discharged in bankruptcy. Typically, you either must pass the means test and file for a Chapter 7 bankruptcy, or complete a three to five-year Chapter 13 bankruptcy repayment plan. With Chapter 13, if any debt is left over after the five-year mark, it’s generally dismissed at this time. With Chapter 7, it may be discharged initially upon the acceptance of your bankruptcy peti8tion.
When to Contact a Bankruptcy Attorney
If you are struggling to meet your financial obligations, there may be legal options for debt relief available to you. Contact Caplan Bankruptcy today for more information or to schedule your consultation at (407) 543-1801.