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Dischargeable - Definition

George Simons | October 19, 2022

George Simons
Co-Founder of SoloSuit
George Simons, JD/MBA

George Simons is the co-founder and CEO of SoloSuit. He has helped Americans protect over $1 billion from predatory debt lawsuits. George graduated from BYU Law school in 2020 with a JD-MBA. In his spare time, George likes to cook, because he likes to eat.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: When your debt is discharged, it means you are no longer responsible for it. Here is SoloSuit's guide on dischargeable debt and how it is connected to bankrupcty.

In debt collection terminology, the term 'dischargeable' refers to the type of debt you are no longer responsible for, usually after filing for bankruptcy. Debt collection laws do not permit creditors to collect a dischargeable debt. In addition, they cannot contact you to collect such debt while the bankruptcy petition is still pending in court.

There are different types of dischargeable debts under Chapter 7 and Chapter 13 bankruptcy. Most of these debts are unsecured.

Unsecured debts are the kind of debts that don't require collateral. Common examples of unsecured debts include credit cards, utility bills, medical bills, etc.

Dischargeable debts in Chapter 7 and Chapter 13 bankruptcy

A Chapter 7 bankruptcy focuses more on discharging most or all of your unsecured debts, or debt that are not backed by assets (credit cards, medical bills, utility bills, etc.).. This is usually the most common type of bankruptcy. On the other hand, a Chapter 13 bankruptcy evaluates your financial situation and leans towards creating a repayment plan to help you manage secured debt, such as mortgage and car payments, while discharging your unsecured debts.

Not all debts are dischargeable. Some will stay with you even after filing for bankruptcy. Here are quick examples of debts that can't be easily discharged.

Student loan debts are not dischargeable

If you're unable to repay your student loan, it may not be easy to get rid of this debt even after filing for bankruptcy. According to a recent study, the total student debt in the United States stands at $1.75 trillion. Does that ring a bell? Getting rid of student loans through bankruptcy could mean that the government will lose over $1.75 trillion. This explains why student loans tend to stick with you even when you file a Chapter 7 bankruptcy.

Although you may not be able to get rid of student loan debts entirely, you can reduce the repayment amount by filing for a Chapter 13 bankruptcy. This option allows you to reduce the repayment plan on your student loan for the length of the Chapter 13 bankruptcy, usually between 36 to 60 months.

Debt incurred through fraudulent activities are not dischargeable

If you commit fraud to obtain money or property, filing for bankruptcy may not save you from repaying what you owe. In fact, some creditors might file an objection to your bankruptcy case, forcing you to pay what you owe.

Fraud is often interpreted in different ways. For example, if you intentionally use a credit card to purchase goods or services with no intention of paying off the debt, this could pass as fraudulent activity.

Misinterpretation is also another reason your bankruptcy case may be denied. For instance, suppose you lied about your income to obtain a loan. If so, this could be a case of misinterpretation and deception. Such offenses attract hefty punishments, including fines and jail time.

Debt incurred through excessive spending is not dischargeable

The main reason for filing for bankruptcy is that you're no longer financially able to pay your debts. However, some consumers file for bankruptcy for questionable reasons, and this is something creditors are always concerned about.

For example, when you file for bankruptcy a week after spending thousands of dollars on gold chains and other luxury items, creditors could interpret such activity as questionable. They'll assume that you're trying to trick the system by depleting your credit cards before filing for bankruptcy, knowing that creditors can't come after a dischargeable debt.

To prevent such scenarios, you may not be able to discharge debt incurred within 90 days of filing for bankruptcy if you spent the amount on luxury items or services worth $800 or more. The same applies if you took a cash advance of $1100 or more 70 days before filing for bankruptcy. However, it's important to note that this rule only applies to bankruptcy cases filed between April 1, 2022, and March 31, 2025.

When should you file for bankruptcy?

Filing for bankruptcy is scary. But sometimes, it could be the only way out of a tight financial situation. Before filing for bankruptcy, it's always advisable to consider all options available, such as debt consolidation, fundraising, etc. Filing for bankruptcy may be the only option if you have huge medical bills, marital problems, heavy credit card debt, or anything along those lines.

But before filing for bankruptcy, it's important to decide which type of bankruptcy suits your specific situation.

Chapter 7 bankruptcy is the preferred option if you don't wish to keep any of your assets. This is because this type of bankruptcy collects all your assets and resells them to pay off your debts.

If you have personal assets, such as a business, home, or car you wish to keep, you may need to file a Chapter 13 bankruptcy. Also known as reorganization bankruptcy, a Chapter 13 bankruptcy gives you a grace period to pay off your debt. This option works best if you have a stable and consistent source of income. All remaining debts will be discharged at the end of the grace period.

When you file for bankruptcy, it usually stays in your records for up to 10 years. Creditors cannot contact you once your bankruptcy case has been approved. In addition, they may not contact you even while your case is pending.

Things to consider before filing for bankruptcy

Filing for bankruptcy is a major, life-changing decision you shouldn't make alone. Before you decide to go down this path, make sure you've exhausted all your financial options. You never know the choices you have until you consult widely. Talk to a financial expert about your current financial situation.

Besides, some creditors are always willing to negotiate with consumers to prevent them from filing for bankruptcy. This is because they know that once you've filed for bankruptcy, they may not be able to recover anything from you.

SoloSuit can help you respond to a debt collection lawsuit

If you've been sued for a debt you owe, the first step to winning in court is to file a written Answer. You can save yourself the time, money and stress of finding an attorney. Instead, represent yourself with SoloSuit's help and beat those debt collectors at their own game!

You have up to 35 days to respond to a debt collection lawsuit, depending on which state you live in. If you don't respond in time, you will lose by default. When a default judgment is entered into a debt collection case, the debt collector will have rights to garnish your wages, seize your property, and even freeze your bank account.

For this reason, you should respond to the lawsuit as quickly as possible.

Check out this video to learn more about how to file an Answer to a debt collection lawsuit:

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