What Debts Are Discharged in Connecticut Bankruptcy Cases?
Filing for bankruptcy can be a daunting process, but understanding which debts can be discharged in Connecticut can alleviate some of the stress. Bankruptcy laws are designed to provide relief to individuals and businesses, enabling them to reset their financial situations. In Connecticut, the two most common types of bankruptcy filings for individuals are Chapter 7 and Chapter 13. Each type of bankruptcy has specific rules about what debts can be discharged.
Chapter 7 Bankruptcy Discharges
Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," is typically used by individuals with limited income. In this process, a trustee sells non-exempt assets to pay creditors. However, many debts can be discharged, allowing individuals to emerge from bankruptcy with a clean slate. Common debts discharged in Chapter 7 include:
- Credit Card Debt: Unsecured credit card debts are typically discharged, relieving the debtor of the obligation to pay these amounts.
- Medical Bills: Unsecured medical debt incurred for personal care is also usually discharged in Chapter 7 bankruptcy.
- Personal Loans: Unsecured personal loans and lines of credit can be discharged unless they are secured by collateral.
- Utility Bills: Unpaid utility bills can often be eliminated through bankruptcy proceedings.
- Some Tax Debts: Certain tax debts may be dischargeable if they meet specific criteria, such as being over three years old.
Chapter 13 Bankruptcy Discharges
Chapter 13 bankruptcy differs significantly from Chapter 7, as it involves a repayment plan that lasts three to five years. This type is more suitable for individuals who have a steady income but are struggling with debt. In Chapter 13, while debts are not discharged immediately, many of them can be dealt with through the repayment plan:
- Credit Card and Medical Debt: Similar to Chapter 7, unsecured debts such as credit card balances or medical bills can be discharged at the end of the repayment plan, lessening the overall financial burden.
- Mortgage Arrears: Although mortgages themselves cannot be discharged, Chapter 13 allows debtors to catch up on overdue mortgage payments to keep their home.
- Car Loans: Debtors may be able to modify their car loans and, if they complete the repayment plan, any balance remaining on the vehicle loan may be discharged.
- Tax Debts: Some tax liabilities may be settled through the repayment plan, and any remaining balance may be dischargeable at the conclusion of the plan.
Debts That Are Not Discharged
It is crucial to note that not all debts can be discharged through bankruptcy in Connecticut. Debts that remain after bankruptcy proceedings include:
- Child Support and Alimony: Obligations for child support and spousal support cannot be discharged.
- Student Loans: Most student loans are non-dischargeable unless the debtor can prove undue hardship.
- Certain Tax Debts: Recent tax debts, along with those filed incorrectly, cannot be discharged.
- Criminal Fines and Restitution: Fines related to criminal convictions remain the responsibility of the debtor.
Understanding the types of debts that can and cannot be discharged in bankruptcy is essential for anyone considering this route in Connecticut. Consulting with a knowledgeable bankruptcy attorney can provide personalized guidance and help navigate the complexities of financial relief options. By knowing the details of what debts are discharged in Chapter 7 and Chapter 13 bankruptcies, individuals can make informed decisions about their financial futures.