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Chapter 7, despite its reputation, doesn't eliminate all debts

Chapter 7 is often thought of as a way to wipe the slate clean and erase all debts. While it can in some cases, it's important to know that every single debt isn't discharged in every case. Some debt can remain. That doesn't mean you should not use Chapter 7, but just that it's crucial to really understand what it can do for you and how beneficial it can be.

For example, if you incur new debts after you list out your debt in the filing, they won't be discharged. It's important to really make a comprehensive list.

If you owe child support, you have to keep making those payments. The same is true for alimony. Eliminating other debts may make these payments more affordable, but they don't stop in bankruptcy.

Another good example involves back taxes. They also likely won't be discharged, as many taxes are not. You may have other options, such as working with the IRS to see if they'll accept less than the total of what you owe, but bankruptcy may not wash them out entirely.

Finally, it's important to note that most student loans remain throughout the Chapter 7 process. As with everything, there are exceptions to this rule if the debt is considered a hardship, but the majority of student loans are not discharged. There is also no asset connected to the student loans that can be sold or liquidated.

When you are considering your bankruptcy options and thinking about Chapter 7 or Chapter 13, make sure you have a full grasp of your debt load, what the filing will do, and what option is best for your specific situation.

Source: eCheck.org, "A Guide to Senior Citizens and Bankruptcy: When to Do it and When Not To," accessed March 31, 2017

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At the law offices of William H. Oliver, Jr. & Associates in Toms River and Lakewood, New Jersey, we represent clients in Toms River, Neptune, Trenton, Middletown, Red Bank, Wall, Lakewood, Lakehurst, Manchester, Asbury Park, Old Bridge, Jamesburg, Barnegat, Forked River, Manahawkin, Ocean Township, Brick, Manasquan, Howell, Freehold, Hazlet, Bradley Beach, Brown Mills, Long Branch, Keansburg, Marlboro, Bayville, Beachwood, Whiting, Sayreville, South River, East Brunswick, Monmouth County, Ocean County, Middlesex County, Burlington County and Mercer County.