A discharge is when your unpaid debts are eliminated or wiped. Once your debt is discharged, you are given bankruptcy protection from debt collectors. Debtors are also now protected from creditors that are harassing you or making any attempt from collecting the debt including foreclosure, repossession, and wage garnishment even if the lender already acquired a judgment from the bankruptcy court. The bankruptcy filing in California through Chapter 7 or Chapter 13 bankruptcy enables you to obtain debt relief and have a fresh start.
What Debts are Dischargeable in California?
In California, discharging your debts require you to file a bankruptcy petition and then pass the credit counseling along with the means test where they measure your median income as required by the Bankruptcy Code. The most common wiped-out debts include the following:
- Auto accident claims
- Attorney fees
- Business debt
- Charge accounts that revolve (extended payment charges are not included)
- Checks that were dishonored (as long as it is not fraudulent)
- Court judgments (for civil cases)
- Collection agency accounts
- Credit card debt
- Debts you owe for lease (including past rent dues)
- Deficiency balance for repossession
- Medical debt
- Overpayments and assistance loans for veterans
- Overpayments for Social Security
- Past dues for utility bills
- Personal liability (personal loans)
- Student loans in case you faced undue hardship
- Unpaid taxes, tax penalties, and other tax debt
- Unsecured debts
In case that the debts listed above are due to fraud or misconduct, these debts will be rendered non-dischargeable. Take note that while most of your debts can be discharged when you file for bankruptcy, there are some debts that are not subject to being erased. There are non-dischargeable debts that include:
- Certain taxes such as:
o Due tax returns
o Tax evasion
o Fraud was involved
- Child support
- Court fines and criminal penalties
- Unscheduled debts
- Spousal support
- Student loans
- Personal injury debts due to DUI
- Debts for housing fees
- Cash advances or luxury purchases within 90 days prior to a bankruptcy filing
What are Unsecured and Secured Debts in California?
Unsecured debts are obligations that do not have security or collateral. Secured debts on the other hand are those debts where you and your creditor came to an agreement to use your property as collateral in case you failed to pay what you owe. Such examples of secured debts are car loans and mortgage payments where a lien was attached to the property.
Can Secured Debts be Discharged?
Yes. Secured debts can be discharged but the lien attached will not be removed for it is one of the creditors’ rights to recover the subject property until you pay all of what you owed. Meaning, you can wipe out your mortgage but the vehicle or property will still belong to the secured creditor. However, there are cases where the creditor fails to collect the secured property due to the expenses to be incurred in repossessing them. Creditors that fail to take collateral of security interest will render the debt unsecured and thus subject to discharge.
Can I be Denied of Discharge in California?
Yes. A debtor that filed for bankruptcy may be denied discharge if he fails to follow the requirements under the Bankruptcy Laws. The most common barriers for a discharge are:
- Failure to follow court rules and bankruptcy procedures that will enable the bankruptcy court or trustee to deny your bankruptcy petition.
- The debts are not dischargeable. Not all kinds of debts are subject to discharge and if the court decides that your debts are not dischargeable, you cannot wipe out your debts and the creditors can continue collecting.
Taking Advantage of your Petition for Bankruptcy
Declaring bankruptcy enables you to be relieved of your financial problems when you are struggling with debt. Hence, having an experienced bankruptcy attorney in California to guide you and take advantage of the benefits that bankruptcy provides is a big help. If you are considering bankruptcy or having debt problems, our reliable bankruptcy lawyers at Pasadena Law are ready to assist you in your needs. Call us now for free legal consultation.