Can all debts be discharged in bankruptcy?

Bankruptcy helps you to take care of many of your debts. However, not every debt that you have will simply go away when you file bankruptcy. Certain debts are not dischargeable at all, and in certain chapters of bankruptcy, you will need to repay a portion of your debt before anything may be discharged.

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How are debts classified in bankruptcy?

When you declare bankruptcy, debts are broadly grouped into two main categories: debts that are dischargeable, which can be included in the bankruptcy, and debts that are not generally considered dischargeable and that you will still be responsible for paying after the bankruptcy.

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What debts are not discharged in bankruptcy?

Non-dischargeable debts are debts that must be repaid even if the debtor files for bankruptcy. Under Chapter 7 bankruptcy law, the assets that you have which are not considered exempt are sold and the proceeds from those sales, as well as any cash or savings accounts that are part of the bankruptcy estate will be used to repay your creditors. At the end of this repayment period, there are usually some debts on which you still owe a balance. If those debts are dischargeable, then that balance is ‘discharged’ or forgiven.

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Can a creditor ask a debtor to reaffirm a debt?

The decision to reaffirm a debt is voluntary; no law requires the debtor to do it. The debtor can also choose to pay a debt that has been discharged in bankruptcy without reaffirming the debt, which means that the lender has no legal rights to collect the debt. A creditor may also ask a debtor to reaffirm the debt before he (the creditor) will agree to do business with the debtor again. This only applies in Chapter 7 consumer bankruptcy. This will not usually happen in a business Chapter 7.

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