The final step in a Chapter 7 bankruptcy is usually granting the debtor's discharge. To become eligible to receive a Chapter 7 discharge (relinquishment of debt) a debtor must, with very limited exceptions, complete a personal financial management instructional course offered by an approved provider, which can be taken in person, on the telephone, or over the Internet within sixty days after the first date set for the meeting of creditors.
A Chapter 7 discharge can eliminate the legal obligation to pay most or all of ones debts, prevent repossession on a car or other property and sometimes return property repossessed. It can stop wage garnishments, and other types of levies on accounts. Also, it can stop harassment from creditors attempting to collect debts. Granting a discharge in a chapter 7 bankruptcy can offer enormous benefits to a debtor drowning in debt and truly give one the relief they need.
Although bankruptcy is a powerful remedy, it cannot however remedy every financial situation. Additionally, it is not the right course of action for everyone. A Chapter 7 bankruptcy typically can't discharge debts such as child support, alimony, court restitution orders, criminal fines and most taxes, debts incurred through false pretenses, fraud, or false financial statements, creditors not listed or scheduled by the debtor, willful and malicious Injury, marital property settlement debts and pension loans. Student loans generally are not dischargeable in a Chapter 7 proceeding as well; however, there can a limited exception to this rule. Also, a Chapter 7 proceeding typically can't eliminate certain rights of secured creditors. A creditor is secured if it has a mortgage or other lien on property as collateral. Car loans and home mortgages are common examples. Often one may force secured creditors to take payments during the bankruptcy but cannot eliminate your obligation to pay on the debt if one plans on keeping the property.
Can Taxes Ever Be Discharged Under A Chapter 7 Bankruptcy?
Generally taxes are not dischargeable in a bankruptcy proceeding. However, there are exceptions to this general rule. The following are the taxes not dischargeable in a chapter 7 bankruptcy proceeding:
- Any tax for which a return, or equivalent report or notice, if required, was not filed, for which a fraudulent return, report, or notice was filed,or which the debtor willfully attempted to evade;
- Any tax regarding which a late return was filed within two years before the date of filing of the bankruptcy;
- Taxes on income or gross receipts with some qualifications;
- Property taxes assessed before commencement of the bankruptcy case and last payable without penalty less than one year before filing of the bankruptcy;
- Certain types of excise taxes and;
- Taxes required collecting or withholding by the debtor, such as employment “trust fund” taxes (income taxes and FICA withholding) or sales taxes.
What Assets Am I Able To Retain In A Chapter 7 Bankruptcy?
Generally a debtor can keep all exempt, non-encumbered property. Non-encumbered property is property that has no security interest attached to it such as a mortgage or car note. Although, the bankruptcy code does not specifically define “exempt” property, the property a debtor can keep will often depend on one's choice of using federal exemptions under the bankruptcy code or exemptions under state law. The property that debtors can keep and be claimed as exempt is listed under section 522(d) of the bankruptcy Code. With some exceptions, debtors may keep their house, car (usually one vehicle per debtor), household goods, household furnishings, wearing apparel, appliances, jewelry, tools of the trade, unmatured life-insurance, accrued dividends, interest or loan value of life-insurance, health aids, and disability and retirement benefits that replace wages. This list is not exhaustive and one must remember there may be value qualifications for these exemptions. For a more detailed analysis and information regarding the types and amounts of property one may keep one should consult with a professional.
For more information on Types Of Debt Which Are Discharged Under A Chapter 7 Bankruptcy In Iowa, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (515) 451-1260 today.