Facing overwhelming debt can feel like being adrift in a storm. Financial difficulties can impact anyone, and the thought of filing for bankruptcy often comes with a mix of hope and apprehension. One of the most common questions we hear is, "Will filing for bankruptcy clear all my debt?" It's a critical question, and understanding the answer is the first step toward finding your way to calmer waters.
The short answer is: Bankruptcy can eliminate a significant portion of your debt, but not always every single obligation. The goal of bankruptcy, particularly for individuals, is to provide a "fresh start" by discharging certain debts. However, some types of debt are considered non-dischargeable by law, meaning they will remain even after your bankruptcy case concludes.
What Debts Can Be Discharged?
For most New Yorkers considering bankruptcy, the primary relief comes from the discharge of unsecured debts. These are debts not tied to specific collateral. Common examples that can typically be discharged include:
Credit Card Debts: Balances on your credit cards are often the biggest source of stress and can usually be eliminated.
Medical Bills: High medical expenses, even with insurance, can quickly become unmanageable and are typically dischargeable.
Personal Loans: Unsecured personal loans from banks or other lenders can also often be discharged.
Past Due Utility Bills: While ongoing utility payments will remain your responsibility, past-due amounts can often be included.
Certain Older Tax Debts: While many tax debts are non-dischargeable, certain older income tax obligations may be discharged if they meet specific criteria regarding filing dates and assessment.
Judgment Debts: Many civil court judgments, unless based on fraud, can be discharged.
When you file for bankruptcy, an "automatic stay" immediately goes into effect. This is a powerful protection that temporarily stops most creditors from taking collection actions against you, including harassing calls, wage garnishments, and even foreclosure proceedings.
What Debts Are Generally NOT Discharged?
It's important to be aware of the debts that typically survive a bankruptcy filing. These include:
Child Support and Alimony (Domestic Support Obligations): These are considered priority debts and cannot be discharged in bankruptcy.
Most Student Loan Debts: While there's a rare "undue hardship" exception, discharging student loans through bankruptcy is very difficult to achieve.
Recent Tax Debts: Income taxes that are too recent, or for which returns weren't filed, generally cannot be discharged.
Debts from Fraud or Willful and Malicious Injury: Debts incurred through fraudulent activity or intentional harm to another person or property are typically not dischargeable.
Certain Fines and Penalties: Court-ordered fines and criminal restitution are generally not dischargeable.
Secured Debts (if you want to keep the asset): For debts like mortgages or car loans, the loan itself is tied to an asset (your home or car). While the personal obligation to pay the debt can be discharged, the lien on the property remains. This means if you want to keep the asset, you generally must continue making payments.
Chapter 7 vs. Chapter 13: What's the Difference for New Yorkers?
In New York, individuals generally file for one of two types of bankruptcy:
Chapter 7 Bankruptcy (Liquidation): This is often chosen by individuals with limited income and assets. It aims to discharge most unsecured debts quickly, typically within a few months. New York residents can utilize state or federal exemptions to protect certain assets, such as a portion of home equity or vehicle equity.
Chapter 13 Bankruptcy (Reorganization): This is for individuals with a regular income who can afford to repay some of their debts over a 3-to-5-year period through a court-approved payment plan. Chapter 13 can be particularly useful for catching up on past-due mortgage or car payments while protecting these assets from foreclosure or repossession.
The choice between Chapter 7 and Chapter 13 depends heavily on your specific financial situation, income, and assets.
Finding Your Path Forward With a Bankruptcy Attorney in Queens
Navigating the complexities of bankruptcy law in New York requires experienced and trustworthy guidance. At Shiryak & Habib LLP, we believe in building long-term relationships based on open communication and mutual respect. We're deeply rooted in the Queens community, and we understand the unique challenges our neighbors face.
If you're a New York resident considering bankruptcy, you don't have to face this journey alone. We're here to offer clarity and direction when things feel uncertain. Let us help you understand your options and whether bankruptcy is the right step for your financial future. We're here to provide the trusted legal support you need to protect your future.
Don't let debt define your tomorrow. Contact us at (908) 460-1337 today for a confidential consultation.