A Macomb County Bankruptcy Lawyer Can Help Consumers Discharge Many Types of Debt
December 22, 2014
It is Possible to Eliminate Unusual Types of Debt
Filing bankruptcy may not be right for every type of debt situation, but in a short time, a Chapter 7 bankruptcy filing can eliminate (called a discharge) some of the most common types of debt faced by consumers. While many individuals understand the basics about how bankruptcy relieves debt, some types of debt seem to fall outside of the mold.
It is important to inform your bankruptcy lawyer about any money you owe — or expect to owe prior to filing. Without knowledgeable legal advice, you may leave debt on the table that you can actually eliminate.
Understanding the Three Basic Categories of Debt
At first glance, it may appear that all types of debt fall into three basic categories:
- Secured debt is any type of loan that is backed by collateral, such as an auto loan or a mortgage. If you default on these loans, the lender may choose to take the collateral back.
- Unsecured debt is any money owed that is not backed by collateral, such as outstanding credit card or even medical expense balances. Chapter 7 bankruptcy generally discharges unsecured debt quite effectively.
- Non-dischargeable debt involves certain types of outstanding balances that the law prohibits from elimination. These include alimony, taxes and some student loans.
Unfortunately, some types of debt do not fall neatly into one of these three categories. Still, it is important to have a frank discussion with an attorney about all money you have to pay out to anyone.
The Rules of Discharge May Not Always be Clear
No-fault auto insurance claims are a prime example of debt that can be left on the table unnecessarily. To clarify, consider this scenario:
- Prior to filing bankruptcy, you were at-fault when you rear-ended and damaged a car.
- The other driver’s no-fault auto insurance policy paid for the repairs to the car.
- The insurance company that paid the claim turned around and filed a lawsuit against you to recoup the money it spent. You now owe them $500.
Most people would agree that this type of debt does not fall neatly into one of the three basic debt categories. If you inform a lawyer about it, however, you will learn that Chapter 7 bankruptcy can discharge this type of no-fault insurance lawsuit award —as long as the accident did not involve drugs or alcohol.
Seek Legal Advice Before Facing Any Type of Unaffordable Debt
Without a doubt, a Chapter 7 bankruptcy filing does not discharge every conceivable type of debt. However the auto insurance lawsuit scenario teaches an important lesson: you may have more options than you think for obtaining the fresh financial start that you need.
At the Law Office of Jeffrey J. Randa, we believe in second chances. Our clients are often surprised to learn that, in the right hands, a Chapter 7 bankruptcy discharge can be the quickest way to begin a new financial future. For a free initial consultation, call us at 586-228-6523, or use our convenient contact form.