Mortgage Debts
Although mortgage debts are one of the most common categories of debts that people include in bankruptcy, they are more difficult to manage than other types of debt. A mortgage debt is a secured debt, which gives the lender the right to foreclose on the property if the tenant defaults on mortgage payments. The bankruptcy procedure can stop or prevent a foreclosure, but the fate of the future becomes the central issue. In a Chapter 7 bankruptcy, the debtor must be able to claim the property as exempt or risk losing it. However, a Chapter 13 bankruptcy can better safeguard the property while the debtor makes mortgage payments.
Second mortgages and home equity loans are a very challenging source of debt to manage in bankruptcy. In some cases, the bankruptcy court may authorize transferring the second mortgage debt into an unsecured debt and writing it off, leaving the borrower responsible for only the first mortgage debt. However, not everyone will agree, and the probability that the court will approve this transaction varies by jurisdiction. Reverse mortgages or home equity loans are typically not dischargeable in Chapter 13 bankruptcy without some form of repayment. Only if the property has lost value and is now worth less than what is owed on the mortgage will the loan be likely to be discharged in bankruptcy.
Tax Debts
Many individuals believe that tax debts can be easily discharged in bankruptcy. In rare instances, these types of debts may be eligible for discharge, but the general rule is that the taxpayer is entirely responsible for repayment. Even though tax debts are unsecured debts, they are held by the federal government and carry a degree of civil liability. It is preferable for debtors to negotiate directly with the IRS for debt repayment assistance.
Student Loan Debts
Student loan debt has become one of the most problematic debts in recent years. It is estimated that nearly half of all student loan borrowers have defaulted on or will default on their debt payments. Similar to tax debts, student loan debts are rarely dischargeable in bankruptcy, and consumers are better off negotiating repayment agreements directly with the lender.""
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