Debts That Could Possibly Be Forgiven Under Chapter 7 Bankruptcy

Personal Loans without Collateral

Unsecured debts include personal loans or credit card balances that do not require collateral to secure them. Unlike secured debts like home mortgages or car loans, which typically get discharged automatically through bankruptcy proceedings, unsecured debts don’t.

Chapter 7 bankruptcy allows debtors to liquidate assets that aren’t exempt, such as work tools and cars, to pay creditors. If any items purchased were worth less than what was owed, lenders could seek a deficiency judgment against you; this form of judgment is called a deficiency judgment. However, debts caused by fraud might still need to be cleared away separately from the bankruptcy filing.

Utility Bills Accumulated Over Time

Even after filing bankruptcy and paying off debts, utility creditors may attempt to collect on past-due balances. However, an automatic stay from bankruptcy prevents them from doing so and terminating service.

Utility companies must give notice before terminating service, and some consumers are protected against immediate disconnection. A bankruptcy lawyer can help negotiate reasonable payment plans so your utilities remain connected.

Utility bills, like secured debt, are considered non priority debts that may be discharged through bankruptcy proceedings in direct cases. Under Chapter 13 bankruptcies, however, utility bills usually form part of an installment repayment plan that must be fulfilled over time.

Business Debts in Personal Liability

You may incur debt for your company as an entrepreneur or business owner. Even if it operates as a corporation or LLC entity, creditors could hold you personally liable if you provided personal guarantees as part of an operating agreement for that entity.

Failure to follow legal requirements when running your business, such as holding regular meetings, keeping accurate records, and using separate bank accounts. Your obligations may remain depending on your business structure, and when filing for bankruptcy, you may even use personal assets as payment.

Overdue Rent Payments & Leases

Back rent payments can be treated similarly to credit card and medical bill debt, which can be discharged in bankruptcy.

Landlords often understand bankruptcy and are generally unwilling to initiate eviction proceedings against those filing bankruptcy; doing so costs money in terms of attorney and other professional services costs.

However, if you are behind in your apartment or home rental payments when filing bankruptcy, the trustee might assume or reject your lease agreement and not permit you to remain at the property. Under such circumstances, you might need to catch up with payments or move out within an established timeline.