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Different Debt, Different Chapter – Understanding Bankruptcy in San Francisco

— June 15, 2023

It’s normal to be unsure which chapter is right for you – that’s why you should seek the help of a skilled lawyer.

San Francisco, CA – A lot of people get understandably confused when they consider filing for bankruptcy. That’s because they are unaware of the types of debt that filing can help you with. They are also often confused by the different chapters of the United States Bankruptcy Code.

Here are a few of the most common questions bankruptcy lawyers hear all the time.

What debts are erased when filing for bankruptcy? And which aren’t?

The U.S. Bankruptcy Code was designed to give debtors a new beginning, while also making sure they paid back what they owed. In many cases filing for bankruptcy can help you or your business reorganize your financial situation, and escape serious debt.

However, in the eyes of the law, not all types of debt are created equal, with some being more pardonable than others. If your specific kind of debt can’t be found below (or if you have to deal with a mix of debts), the best thing would be to speak to seasoned San Francisco bankruptcy lawyers.

Debts that filing for bankruptcy can erase:

  • Medical bills;
  • Personal loans;
  • Credit card debt;
  • Overdue utility payments;
  • Mortgage payments (if you are willing to forego the property/vehicle set up as collateral).

Debts that filing for bankruptcy can not erase:

  • Child support payments or alimony payments owed to a former spouse;
  • Debts incurred in a separation or divorce;
  • Personal injury lawsuit debts (caused by driving under the influence);
  • Attorney fees in child custody/support cases;
  • Court-mandated fines and penalties;
  • Certain types of taxes;
  • Debts to government agencies (fines, penalties).

What about student loans?

Student debt graphic
Student debt graphic; image courtesy of 905513 via Pixabay,

A question well-versed California bankruptcy lawyers often hear is can filing for bankruptcy erase student loans? It can but in very few cases. To erase student loans, your lawyers would have to prove undue hardship, which is almost impossible to prove.

What do different chapter bankruptcies mean?

If you are filing for bankruptcy in California, you will most likely file either under Chapter 7, Chapter 11, or Chapter 13 of the Bankruptcy Code. What’s the difference?

Chapter 7 bankruptcy allows debtors to pay their debts by selling their assets. Within 3-4 months, court-appointed trustees will sell off your property until you pay off all debt. Typically, people with low income qualify for Chapter 7 bankruptcy.

Chapter 11 bankruptcy mostly addresses business entities and firms. Through the help of San Francisco bankruptcy lawyers and court-appointed trustees, the businesses can organize their finances, to allow them to settle debts. The upside of Chapter 11 bankruptcy is that it allows the company to keep running, while also paying off what it owes.

Chapter 13 bankruptcy, also known as reorganization bankruptcy, also allows people to pay off debt while keeping their property. As long as the debtor can keep up with their monthly payments (guaranteed by proving a steady source of income and employment), they don’t risk losing property, vehicles, or other assets.

It’s normal to be unsure which chapter is right for you – that’s why you should seek the help of a skilled lawyer. They’ll walk you through everything you need to know, when filing for bankruptcy in San Francisco.

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