Can I discharge my payday loans and medical bills with Chapter 7 bankruptcy?
When deciding whether or not to file Chapter 7 or Chapter 13 bankruptcies there are several considerations. The first is whether or not you will qualify for Chapter 7 bankruptcy. Unfortunately, bankruptcy law changes have made it more difficult to file Chapter 7, and many debtors will now be required to file Chapter 13 and repay a portion of their debt over a 3 or 5 year repayment plan. Recently on our bankruptcy forum a user asked, “Can I discharge my payday loans and medical bills with Chapter 7 bankruptcy?”
Chapter 7 and my payday loan
Assuming you meet the median income requirements to file Chapter 7 bankruptcy, you can discharge medical bills, payday loans, and other non-secured debts. That’s the good news. The bad news is that the trustee assigned to your Chapter 7 bankruptcy case has the legal authority to confiscate assets which are not exempt from the bankruptcy and liquidate them to repay your creditors.
For more information about assets which are protected during Chapter 7 you can review your state’s exemption list. States generally exempt certain assets: certain types of personal property, the homestead, certain wages, certain pensions, certain public benefits, tools of the trade, and insurance.
What happens after I file bankruptcy?
After you file your bankruptcy petition the court will issue an automatic stay which will stop certain creditors from continuing collection actions. Although some unsecured debt discharges may be challenged by the creditors, assuming yours are not, the qualifying unsecured debts are discharged within 4 to 6 months from the date of the bankruptcy discharge.
Why is filing bankruptcy may not be good idea
Before filing Chapter 7 bankruptcy it is a good idea to consider the negative consequences of the action. For instance, a bankruptcy filing will remain on your credit report 7 to 10 years, making it difficult to borrow money or to get a low interest rate on credit. Bankruptcy can also make it difficult to get some types of jobs or to rent an apartment. The filing is also a public action and information about your bankruptcy can be accessed by others.
Bankruptcy, however, remains a legal means for many filers to discharge debts and make a clean, fresh, financial start. It is not the best choice for everyone. In fact, many debtors with less than $10,000 worth of debt or those who can get a second job, create a budget, and repay their debts should avoid bankruptcy.
What happens if I cannot file Chapter 7 bankruptcy for my medical debt and payday loan?
As mentioned above, many debtors will not meet the income requirements to file Chapter 7 bankruptcy, which means their income is too high and the courts will require them to repay a portion of their debts. If your median income is too high or you have too much disposable income you may be required to file Chapter 13 bankruptcy. If you file Chapter 13 bankruptcy your payday loan and medical debts will not be discharged but will be included in your debt repayment plan and a portion will be repaid.
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