Perhaps you’re one of many California residents who are facing a severe financial crisis. Maybe you’ve recently gone through a divorce or dealt with unexpected issues like medical bills or loss of income. While the holidays are a festive and joyful time of year for most people, if you’re already struggling to stay afloat financially, holiday customs like gift-giving might intensify the struggle. Financial tools such as Chapter 7 bankruptcy are helpful in such circumstances.
It’s important to note, however, that Chapter 7 bankruptcy does not discharge all types of debt. If you qualify for the program, you’ll be able to liquidate your assets and use the proceeds to pay back creditors. If certain types of liability exist when you file for bankruptcy, they will still exist after the process is complete.
You will still owe these debts after Chapter 7 bankruptcy
When you file for Chapter 7 bankruptcy, you’re protected against lawsuits and collections for a wide range of personal debts. Creditors must stop attempting to collect these debts, and no one can sue you to collect a debt. The following list shows specific types of liability not discharged through bankruptcy:
- Money you owe for child support
- Alimony you must pay following a divorce
- Tax liens and income tax debts
- Restitution you’re ordered to pay following a personal injury claim
- Any liability you did not list in your bankruptcy claim
Upon completion of the Chapter 7 bankruptcy process, you will still owe these debts. The good news is that, since most of your other debts will be gone, you might be in a better position to make payments on time.
The Internal Revenue Service (IRS) may offer options if you owe taxes
Many people are disappointed to learn that they still owe monies to the IRS after bankruptcy. If you have no means of paying such debts, you can request alternative options through the IRS. For example, they sometimes will allow an individual to pay a lesser amount than owed. You might also be able to create an installment plan so that you can make payments rather than having to come up with the money as a lump sum.
Does Chapter 7 bankruptcy ruin your credit score?
If you’re hesitant to file for Chapter 7 bankruptcy because you’re worried that it will ruin your credit, there are several things to keep in mind. Both Chapter 7 and Chapter 13 bankruptcies do, in fact, appear on your credit report and will remain there for several years. However, when that time has passed, the bankruptcy will disappear, and the report no longer shows this part of your financial history.
A good first step to take is to review all available bankruptcy options, as well as California bankruptcy laws. From there, you can compare programs and determine which one best fits your needs.