In this excerpt from the Legal Action television show, Attorney David Siegel talks about the types of debts that can be eliminated in a Chapter 7 case. He also covers the fact that student loans are not typically eliminated in bankruptcy.
What type of debts can be eliminated through a Chapter 7 Bankruptcy?
A: David Siegel – Any kind of credit card, medical bill, personal loan, past due utility, auto repossession deficiency, money that was lent to you by a family member or a friend or a payday loan store. Those are the typical debts that get eliminated in the Chapter 7 without much of a problem. A problem could come in a case where someone runs up their credit cards in anticipation of filing. They run up charges, they buy electronics, TV, furniture, electronics, cash advances within 60 days of filing are a no-no. Because it just looks to the court like an abuse, you know you were going to be filing so you tapped out all your available credit. The credit card companies about this, they when you filed, then when you charged, and if they feel it was fraudulent they can object, and in that case any of those recent charges would still remain due and owing.
Can I discharge a student loan?
A student loan is non-dischargeable per se. There are some exceptions; undue hardship, but those are very, very hard to prove.
Q: “My understanding is you have to be in very sad, sad shape, and that you’re not able to work at all, really. I’m not talking about a bad back here, I’m talking about being completely disabled.”
A: David Siegel: Right. The student loan situation is just what you said. If you have the ability to repay it to any extent at all then you’re going to have to repay it.
What happens if I have the student loan and I use my credit card to pay back the student loan?
David Siegel: The credit card company could object, because that debt that you incurred was used to pay a non-dischargeable debt. The same thing would be if you paid for non-dischargeable taxes with a cash advance that you took out on a credit card. You can’t abuse the credit cards. If in any ordinary course of life if you ran up a debt that’s one thing, but if you abuse it, run it up at the last minute, take out a huge cash advance, do something that tantamount to fraud, plan on that sticking around. If you do enough fraud they can deny your whole bankruptcy, which is basically the death sentence. That means you could never eliminate those debts through a bankruptcy ever for as long as you live.
