Financial hardships are a problem that can happen to even the most financially cautious people. Sudden job loss, medical emergencies, and other unplanned expenses can quickly drain a person’s savings and cause them to go into debt to cover these costs.
For some, bankruptcy may be the best option to discharge their debt. In fact, hundreds of thousands of people every year use bankruptcy to help them with their financial struggles. Bankruptcy can help with many forms of debt, but not all types. Here is what you need to know about what kind of debt bankruptcy can discharge:
The types of debt you may have
There are two primary types of consumer debt that debtors can have: secured debt and unsecured debt. Secured debt is a form of debt that comes with collateral, such as a mortgage having the home as collateral or a car loan having the car as collateral. Unsecured debt is debt that does not have collateral attached to it, such as medical debt, credit card debt, and utility bill debt.
How bankruptcy can help
Both Chapter 7 bankruptcy and Chapter 13 bankruptcy offer consumers the opportunity to discharge or restructure their debt, but this only applies to unsecured debts. Bankruptcy cannot discharge your mortgage or car loans. It also cannot discharge student loans due to a law that blocks that debt from bankruptcy discharge.
Can bankruptcy help you?
If you are having trouble paying all your monthly bills, are taking payday loans to make ends meet, or stay up at night worrying about how to pay your debts, bankruptcy may be the option you are looking for. Consult with a bankruptcy attorney to confirm how bankruptcy can help you, what debt may be eligible for discharge, and what you can do to take back control of your finances.