A common misconception is that when debts are discharged during a bankruptcy, the tax payer picks up the burden. This is simply not true – in the process of a bankruptcy, the creditors are the ones who take a financial hit. They do this by often getting pennies on the dollar amount of what they originally loaned, so it’s never a pleasant process for them.
When a court declares your debts discharged, it essentially becomes illegal for creditors to contact you about the debt. However, not all debts are discharged and this is why it is important for you to contact someone who can advise you regarding bankruptcy law and which part of your debt is most likely to be discharged. Every bankruptcy is different and bankruptcy laws vary widely, state by state. A bankruptcy attorney will be able to counsel you regarding the laws that are particular to your state and give you a good indicator if bankruptcy is really your best option.
Starting fresh is an important part of beginning on a road to financial freedom and recovery. A court will be able to look at your situation – past, present, and future – and determine your ability to reasonably pay off your debt. If the court finds that some debts should be discharged, they will focus on the high-interest ones and determine if you will pay them back partially, or not at all. Since each bankruptcy is different, it is impossible to determine exactly which debts will be cleared by the courts, but a bankruptcy attorney will be able to give you a good estimate of what might happen in your particular situation.
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