A misconception exists that when you file for bankruptcy in Washington State, all of your debt is discharged. Though anyone suffering from financial hardship would prefer to have a clean slate to get back on their feet, it is not always the case. Much of what debt is discharged depends on what type of debt it is and under which chapter you file for bankruptcy.
At Hallaq Law, our bankruptcy attorney in Pierce, King, or Snohomish county can help you understand what debt is dischargeable and what debt may not be. We will review your financial situation and listen to your concerns about the outcome of your bankruptcy, and we will advise you accordingly. To learn more about your options when filing bankruptcy, contact us today at (206) 751-6643 to schedule a free initial Bankruptcy consultation.
Why Does the Type of Debt You Have Matter in Washington State Bankruptcy Cases?
Not all debt can be discharged when you file for bankruptcy, and that is why the type of debt matters. Before you file a bankruptcy petition, you need to know what is dischargeable, what is not, and what might be under certain circumstances. The two types of debt you need to know are secured and unsecured debt.
What is Secured Debt?
Secured debt is just that: it is debt that is secured by an asset. For example, if you buy a car, and you take out a loan to buy that car, you sign a document saying that you understand that if you do not make your payments as agreed upon, the lender is able to repossess the car. That is because the money that was lent to you was secured by the car.
If you file for a Chapter 13 bankruptcy, you may have choices about what to do with secured collateral. You may be able to keep it and continue paying the payment, along with an arrears payment, or you may need to return the property to the lender.
If you file for a Chapter 7 bankruptcy, your secured debt may be discharged, but the lender is also able to repossess the property that secured the debt, if you are not current on payments.
What is Unsecured Debt?
Unsecured debt is debt that is not backed by any collateral. Credit card debt is unsecured debt. A credit card company gives you a credit card with a specific limit on it after you sign. The agreement between you and the credit card company basically expresses you will pay back any amount charged with interest. The loan is based on your agreement alone. If you do not pay the debt back, the lender has limited options and typically cannot repossess anything.
Dischargeable vs. Non-Dischargeable Debt in Chapter 7 Bankruptcies Filed in Washington State
Like Chapter 13 bankruptcies, both secured and unsecured debt can be discharged in Chapter 7 bankruptcies with some significant exceptions when it comes to unsecured debt.
The following debt can be discharged in a Chapter 7 bankruptcy:
- Medical bills
- Personal loans
- Credit card debt
- Old apartment bills/eviction costs
Generally speaking, there are certain types of unsecured debt that cannot be discharged in a Chapter 7 bankruptcy, including:
- Student loans
- Debt incurred from fraud (for example, if you lied on an application and the debt was incurred from the lender's reliance on that lie)
- Money obtained in anticipation of the bankruptcy filing
Contact a Bankruptcy Attorney in Pierce, King, or Snohomish County Today
Bankruptcy in Washington State is a way to get your finances back in order, to stop a wage garnishment and in doing so, it helps you get your life back on track. Through this process, it is integral to understand what debt can and cannot be discharged.
At Hallaq Law, our bankruptcy lawyer will thoroughly answer your questions, review your financial situation, and guide you through the process. To learn more, contact us today at (206) 751-6643 or fill out our online contact form to schedule a free initial Bankruptcy consultation.