Two Primary Reasons Why People File Chapter 7 Bankruptcy

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The desire to get rid of their debt is the prime motivator prompting most people to file for Chapter 7 bankruptcy. And, in most cases, the majority of their debts will be wiped out. Especially the dischargeable debts. So what exactly are dischargeable debts?

Credit card debts are probably the largest category of debts that consumers want discharged when the enter a bankruptcy court. And, luckily for them, credit card debts, except in the case of intentional fraud, are normally discharged once the bankruptcy is approved.

But, it is crucial that you have not run up any unusual and huge charges on your credit card before you file for bankruptcy. Doing so may indicate an attempt on your part to deceive the credit card company. It may be an indication to the court that you knowingly tried to get all the benefit from you credit cards before filing for bankruptcy in an attempt to have them discharged. The court does not look favorably upon this and considers it fraud.

A second reason that many people file for bankruptcy is due to a catastrophic illness in the family. Maybe your child has come down with a disease that has resulted in thousands or hundreds of thousands of medical bills. Unable to repay these bills back, many people file for bankruptcy with the hope of having them discharged. Fortunately, medical bills are dischargeable if your bankruptcy filing is approved. The amount of dollars discharged by the bankruptcy courts due to unpayable medical bills runs into the billions of dollars.

If you have been sued by a creditor and lost the suit, the creditor is enabled under the court to collect the monies he is owed via a number of different means. He can garnish your salary, place a lien on properties that you own, garnishee your bank accounts, and more. Once you file for bankruptcy, however, most of these debts become dischargeable under the law.

This is also the case for any contractual agreements that you may has signed. For instance, if you have signed an apartment lease or if you have joined a membership club that requires you to make periodic payments - these are probably debts that will be discharged by the courts.

There are many more categories of debts that can be discharged. Many, however, are state specific and you will need an expert in how bankruptcy works in your state to determine which of your debts are dischargeable. A general guideline, however, is that if the debt is not an income tax debt, it doesn't involve child or spousal support, or the debt is not a secured debt such as a home or an automobile, the the debt is probably dischargeable.

Article Source: http://depositarticles.com/

David Hoyer is a freelance writer who writes articles concerning credit / debt settlement vs bankruptcy and bankruptcy lawyer fees and other financial issues. Please visit his site for more information.

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