You must have heard about bankruptcy. It may sound complicated, but trust me, it is not. Whenever you find yourself stuck under the burden of debts, remember that the idea of bankruptcy has got you covered. It is like a restart button. As soon as you press this button, your debts will disappear for good.

But the question is, is your debt even eligible to get discharged by filing for bankruptcy? If you are curious to know the answer, continue reading this article and learn how bankruptcy can benefit you.

All You Need to Know About Personal Bankruptcy

Bankruptcy is nothing but a legal procedure designed to help or facilitate those people who find themselves surrounded with overwhelming financial problems. Imagine yourself in a situation where you owe more cash than you are able to pay back. In such cases, personal bankruptcy helps you to make a fresh start. It is like pressing a reset button to bring you back to where you started.

Once you have declared yourself bankrupt, the court or legal authorities determine how much cash you owe and how much money you can pay back with the bit of money you have. Personal bankruptcy may be of different types, but some of the debts may be waived in some cases. It means that you are free from the obligation of repaying those particular debts. This not only provides relief but also breathing room for the individuals drowning in loans. However, it is essential to understand that not every debt is erasable.

Which Debts are Included in Bankruptcy?

If you declare yourself bankrupt, it means that you are in severe financial trouble. But wait a minute! What if I tell you that some debts are included in the bankruptcy process? Here are some debts that are waived off if you declare bankruptcy.

Credit Cards

You can think of credit cards as some sort of a magical card because they allow you to purchase things even if you lack money at any particular time. However, there are instances when you may accumulate debt that exceeds your means of repayment. If this occurs and you find it too difficult to manage your debt, you can think about filing for bankruptcy.

For example, you own a credit card that you used to purchase a brand new cell phone worth eight hundred dollars. Now, if it gets challenging for you to make monthly repayments and the loan keeps growing, you can declare personal bankruptcy to erase that eight-hundred-dollar debt on your credit card.

Medical Bills

If you get hurt or sick, you might go to a hospital and let the hospital staff take care of you. But what if your bills have piled up, and you are unable to pay for that care? In such a case, bankruptcy can solve your financial problems, giving you a little relief from all the hospital bills.

For example, you went to a hospital in an emergency. You got admitted to that hospital, and your total medical bill came out to be approximately three thousand dollars. If you aren’t able to find any other way of paying your hospital bill, declaring bankruptcy can clear that three thousand dollar debt on you.

Personal Loans

These loans are similar to borrowing some money from your family, friends, or a company that lends. Suppose you borrowed one thousand dollars from a close friend to pay for unexpected expenses. If repaying that money is becoming stressful for you and affecting your relations, declaring bankruptcy will help you manage your debts by eliminating that personal loan worth one thousand dollars, making you financially stable.

Utility Bills

You must pay for the everyday essentials like water and electricity that you use to survive. Filing for bankruptcy can be an option if, for whatever reason, you are unable to make payments on time and the expenses begin to mount. This could include past-due energy bills.

For instance, you are financially unstable, and an electricity bill worth five hundred dollars awaits you. If this financial obligation is becoming too much for you to handle, filing for bankruptcy may relieve you of that five hundred dollar utility bill and provide you with the fresh start you need to continue receiving your essential services.

Old Taxes

Tax is basically the money you are obliged to pay to the state or federal government from your income. You must pay the tax annually. But if you fail to do so, and your taxes accumulate, then declaring bankruptcy can be the only possible option for you to free yourself from the debt you owe to the government. Yes, you heard it right; you can even get rid of several years old taxes by simply filing for bankruptcy.

Which Debts Are Not Discharged by Bankruptcy?

Not all the debts can be waived by bankruptcy. Here are some of the debts that you must pay even if you are bankrupt.

• Student loans cannot be avoided by filing for bankruptcy.
• Taxes from the current year are to be paid at any cost.
• Loans related to child support are not covered by bankruptcy.
• Debts obtained for luxury goods or services in the immediate lead-up to declaring bankruptcy could not be exempt.
• Bankruptcy may not be able to dismiss debts that are the consequence of an order from the court for repayment following a crime.

Bankruptcy laws are pretty complex. The specifics can vary depending on the kind of bankruptcy you tend to file. So, it is always better to consult a bankruptcy attorney to get the required information according to your financial situation.

The Bottom Line!

To sum up, bankruptcy can be your best friend if you are dealing with financial stress. It can help you eliminate certain debts like hospital and utility bills, but it is not a perfect solution as some debts like recent taxes and student loans stick around. Think carefully before filing for bankruptcy, as it can make it difficult to get loans in the future. And talk to a professional to understand the complexities of bankruptcy better.