The law allows for some exemptions, even in bankruptcy cases. These generally refer to income sources that are exempt, or can’t be used to pay off debt.
Dallas, TX – Landing in bankruptcy court is never a pleasant experience. A lot of social stigmas have been attributed to going bankrupt, leaving many people embarrassed and ashamed to declare bankruptcy.
However, the point of bankruptcy isn’t to shame you, but to help you. By filing for bankruptcy and hiring qualified lawyers, you get to pay off your debt and pave the way for a new beginning. As such, filing for bankruptcy can be highly beneficial, but not all types of debt are created equal.
What kinds of debt qualify for bankruptcy?
If you’re considering filing for bankruptcy, you need to first make sure the type of debt you’re dealing with is qualified, under legal terms. So before you reach out to the best Dallas bankruptcy lawyers, read about the different debt types below.
Here are the main types of debt that can be discharged when filing for bankruptcy in Texas:
- Credit card debt;
- Personal loans;
- Debt from divorce (this does not include support/alimony settled in that divorce, though);
- Lawsuit obligations from contracts/leases;
- Retirement plan loans;
- Medical expenses/bills.
Will bankruptcy erase my student loan debt?
It can, but very rarely. Basically, in order for your student loan debt to get erased by a bankruptcy claim, the courts will ask you to prove undue hardship (legally defined as “action requiring significant difficulty or expense“). Unfortunately, proving undue hardship is very difficult, and rare, so in most cases, no, bankruptcy will not erase your student debts.
What kind of debt does NOT qualify for bankruptcy?
Bankruptcy laws were created to help people get rid of their debts, but not all types of debt can be relieved. You should sit down with experienced Texas bankruptcy lawyers. to see what it the best course of action for you if your most pressing debts include:
- Child support and alimony payments;
- Debt to government agencies;
- Secured debt (aka your mortgage or car loan);
- Debts incurred as part of a personal injury lawsuit after driving under the influence.
These types of debt cannot be discharged when you file for bankruptcy under Chapter 7. If you meet the requirements for Chapter 13, you may be able to work out a plan to pay off all of your debts, dischargeable or not.
A team of good Dallas bankruptcy lawyers can instruct you on the best way to proceed, given your specific situation.
Check if you’re judgment-proof!
The law allows for some exemptions, even in bankruptcy cases. These generally refer to income sources that are exempt, or can’t be used to pay off debt. You may qualify as judgment-proof if you:
- Do not own a house;
- Do not own a motor vehicle;
- Rely on social security, Veterans Administration, Supplemental Security Income (SSI), Federal Employee Retirement System or child support/alimony for day-to-day living;
- Do not have more than two months’ worth of any of these income types in your bank accounts.
In other words, if you are poor enough, the court will decide you are judgment-proof, and thus, you won’t have to pay your debts.
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