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How does debt discharge in a Chapter 7 filing work?

Before Kentucky residents pursue any debt relief options, it is important for them to understand how they work and how they will truly affect their financial situations. When it comes to Chapter 7 bankruptcy, there is a lot to it that may not make a lot of sense; for example, discharge of debt. What exactly does that mean?

If debt is discharged through a bankruptcy filing, it simply means that one will no longer be legally responsible for paying creditors for that particular debt. Sound too good to be true? This is not something that is granted to everyone. There are very specific requirements that one has to meet in order to qualify for debt discharge and not all debts are dischargeable. Debts that may not be discharged in a Chapter 7 filing include:

  • Child and spousal support arrears
  • Student loans
  • Certain taxes
  • Civil or criminal court ordered fines/restitution

Chapter 7 bankruptcy is generally meant for those individuals with little or no income. However, those with decent paying jobs but with little disposable income due to their financial obligations may qualify. If this type of bankruptcy is approved, certain property will be sold in order to pay off creditors; then, any remaining eligible debts will be discharged. Discharge takes effect as soon as the court issues notice to the affected creditors. This typically happens within days of court approval.

From the initial filing to the discharge of debt, the Chapter 7 process takes approximately 90 days. However, it can take longer if creditors file any objections. Kentucky residents who would like to know more about this type of bankruptcy, including how the discharge of debt could help them personally, can turn to an experienced bankruptcy attorney to get their questions answered.

Source: uscourts.gov, "Discharge in Bankruptcy - Bankruptcy Basics", Accessed on May 9, 2017

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