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Does Chapter 7 bankruptcy erase all of your debt?

On Behalf of | Nov 25, 2020 | Firm News |

A common misconception about bankruptcy is that it has the power to erase all debt. Permanently. If you choose to file for bankruptcy in Virginia, your understanding of the different types and how each work can help you to make an informed and confident decision.

Chapter 7 bankruptcy allows you to basically start your finances over by erasing a significant portion of unsecured debts. Once underway, you can begin rebuilding your finances and implement new, healthier habits to prevent debilitating debt from happening again.

Identifying remaining debts

Not all of your debt will disappear when you file for Chapter 7 bankruptcy. According to Experian, certain debts will remain and require your ongoing payment. These include the following:

  • Spousal support
  • Court fees or legal penalties
  • Student loans
  • HOA fees
  • Child support
  • Any unsecured debt you did not include in your filing

After beginning the bankruptcy process, immediately look for ways to prevent debt from disrupting your finances again. If you have debts of the aforementioned kind, prioritize their payment before any other expense.

Preventing a second bankruptcy

Budgeting plays a significant role in protecting you from debilitating debt. Create a thorough budget that shows your monthly income, as well as all of the expenses you have. Contribute consistently to a savings account and look for ways to diversify your savings to build interest where possible.

If you have credit cards, use them wisely. Refrain from spending money on your credit card unless you know that you have enough cash capital to cover that expense. Pay credit card payments in a timely manner.