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Were your debts discharged in your Chapter 7 bankruptcy?

Chapter 7 bankruptcy is a good way to wipe out a mountain of debt, but don't be fooled; it doesn't automatically erase all debts, and some are not legally eligible to be discharged in bankruptcy proceedings.

Bankruptcy courts usually issue discharge orders two to three months after the creditors meet. While it is relatively rare for a debt to be denied a discharge, it is a possibility. Reasons for a denial include when debtors:

-- Are unable to explain lost assets

-- Keep shoddy financial records or none at all

-- Perjure themselves

-- Disobey lawful orders of the court

-- Commit fraud by concealing, transferring or destroying property that would otherwise belong to the estate

-- Do not complete the financial management course mandated by the bankruptcy courts

Examples of non-dischargeable debts include the following:

-- Guaranteed student loans

-- Child support and alimony arrearages

-- Some types of criminal restitution ordered by the courts

-- Some taxes

-- Debts incurred for malicious or willful injury to another person or their property by the debtor

-- Debts for personal injuries or deaths that were caused by a wreck when the debtor was drunk or otherwise impaired

Bankruptcy proceedings are complex matters that must be handled meticulously in order to get the best possible outcome. If a debtor fails to include normally dischargeable debts in the proceedings, they will not be included in the discharge and the debtor will still be responsible for repayment to those creditors.

While some consumers try to handle their own bankruptcy proceedings to save themselves attorney's fees, these kind of mistakes can cost them dearly in the end.

Source: Findlaw, "Chapter 7: Debt Discharge," accessed July 15, 2016

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