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What types of debt relief are available in Chapter 7

Many Michigan residents may believe that a bankruptcy provides complete debt relief from all of a family's financial obligations and gives that family a totally fresh financial start. For the most part, this is true. Bankruptcy remains perhaps the single best means of getting rid of a bunch of debt at one time without having to apply every penny of a person's wealth to paying this debt off.

On the other hand, though, and as other Michiganders probably already know, some debt does not get a discharge in bankruptcy. For a so-called "non-dischargable" debt, the creditor is perfectly free ignore the final result of the bankruptcy and continue to collect the debt until it is paid in full. Common examples of debts that are not dischargable include most taxes, a person's child support obligations and, in most cases, a person's student loans.

Furthermore, and as a word of caution, a debt that does not wind up on a debtor's court paperwork is also non-dischargable even if the debt would otherwise have been effectively wiped out in a bankruptcy. Other, less common types of debt also are immune from a discharge in bankruptcy

However, it is important to remember that even though a creditor owns a debt that will not get discharged, the creditor must still abide by the court's automatic stay that keeps creditors from pursing a debtor while a bankruptcy is pending. Moreover, even when a person has some substantial debt that will not get discharged, it sill may be vital part of a person's overall debt repayment plan.

Chapter 7 bankruptcy is not a cure all for financial problems and cannot even discharge all types of debt. Still, with the appropriate planning, it can be a viable option for Michigan residents. Those Michigan residents who are struggling with debt should consider speaking with an expert Chapter 7 attorney who can help a person both with planning for the future and overcoming the past.

Source: United States Court, "Discharge in bankruptcy," accessed Nov. 3, 2014.

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