What Debts CAN Be “Discharged”?
Bankruptcy can discharge most debts that are “unsecured” and some debts that are “secured”. Debts are either “secured” or “unsecured”:
- Unsecured debts have no property for the creditor to repossess (take back).
- Examples of unsecured debts include most credit card debt and medical bills.
Secured debts usually are tied to a piece of property, for example, your car loan or home mortgage. If you stop making payments, the lender can repossess the property.
What Debts CANNOT Be “Discharged”?
Bankruptcy cannot fix all financial problems. Some debts cannot be discharged, including:
- Alimony and child support
- Student loans (unless you can prove “extreme economic hardship”).
- Recent tax bills
- Secured debts
- Debts that build up after you file for bankruptcy
- Debts resulting from fraud. For example not being truthful on a credit application or if you are not truthful with the court itself.
- Debt resulting from injuries sustained if you caused an accident while driving under the influence.
What Property Can I Keep?
You are allowed to keep enough property for you to make a fresh start after bankruptcy. You may be able to keep most of your household furnishings (furniture, dishes, etc.), some jewelry, your clothing, and tools and any vehicle you use for work. Currently, in Montana you may keep up to $250,000 in equity in your house and the property that the house sits on. Also most people who file for bankruptcy can keep their car if the equity is not in excess of $2,500–it depends on how much the car is worth and whether you still owe money on it.