What debts are discharged in a chapter 7 bankruptcy?

What debts are discharged in a chapter 7 bankruptcy?

Filing for bankruptcy can be a confusing and difficult process, as well as an emotionally challenging one. It’s a decision that no one takes lightly and you need to be clear on exactly what it means for you. It can, however, be a really smart financial decision that gives you the chance to be debt free and feel like you can breathe again. 

A chapter 7 bankruptcy is one of the most common routes individuals take in discharging their debt. One thing people are often not sure of is just exactly what debts are covered under this chapter. 

Chapter 7 bankruptcy discharges unsecured debts

Unsecured debts include things like: 

  • credit cards
  • personal loans (excluding a mortgage and auto loan) 
  • payday loans 
  • medical bills 

These types of debt can quickly, and very easily, spiral causing people to find themselves in an unmanageable position that they can’t see a way out of. They often come with high-interest rates that make them almost impossible to ever pay off. 

Not all debts can be discharged with a chapter 7 bankruptcy

There are some debts not covered by a chapter 7 bankruptcy. These include: 

  • student loans 
  • recent tax obligations 
  • luxury purchases or cash advances on credit cards 
  • anything not included in the bankruptcy petition (although things genuinely forgotten can be added later on) 

With a chapter 7 bankruptcy, a worry people have is whether they will lose their house. The good news is that you can keep your property and car so long as you can afford to keep up with the loan repayments. 

If you’ve made the decision to file for bankruptcy, you’ve taken an important and difficult step toward financial freedom. Make sure you’re protecting your property by taking some advice to help you work through the process as smoothly as possible. 


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Amer Mustafa

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