Does Bankruptcy Clear All Debt in Las Vegas, Nevada?
While bankruptcy can offer relief from qualifying pre-filing debt, debts considered non-dischargeable, such as child support, alimony, student loans, and fraudulent debts, generally can’t be eliminated through bankruptcy in Nevada. Understanding the debts that can be eliminated and those that can’t will help you determine whether bankruptcy is the ideal debt relief option for your circumstances and how to go about the filing process. As such, many struggling with debt problems find themselves asking, “Does bankruptcy clear all debt?” Read on to learn more about dischargeable and non-dischargeable debts in Nevada.
Bankruptcy in Nevada
Bankruptcy is an effective financial solution for thousands of individuals in Nevada every year. It offers a legal way for residents with overwhelming debt to obtain a fresh financial start.
What Are the Different Types of Bankruptcy?
How bankruptcy works for debtors and creditors differs depending on the type of bankruptcy. Typically, individual debtors filing for bankruptcy in Nevada can file a Chapter 7 or Chapter 13 bankruptcy. While both offer protection from creditors, they relieve debt in different ways and provide different benefits.
Chapter 7 bankruptcy, also called liquidation bankruptcy, lets you liquidate property not protected by Nevada exemptions to eliminate most of your unsecured debt. A bankruptcy trustee sells your non-exempt property and uses the proceeds to pay off creditors. Most of the balances remaining after your creditors have been paid off are eliminated, leaving you almost debt-free.
Chapter 13 bankruptcy reorganizes your debts and makes them more affordable by allowing you to fully or partially repay them over several years through a court-approved repayment plan. A trustee collects payments from the debtor and pays creditors. Trustees ensure debtors abide by the terms of the plans and complete plan payments. Chapter 13 bankruptcy helps people with a car or home they want to save from repossession or foreclosure. It usually allows you to retain your property.
Eligibility Requirements for Bankruptcy in Nevada
You must have lived in Nevada for at least six months before filing for bankruptcy. Nevada has exemptions you can use in a bankruptcy filing. You’ll need to have lived in Nevada for two years to claim the exemptions. You must also take an approved credit counseling course to be eligible to file a Chapter 7 or Chapter 13 bankruptcy. Depending on the county where you live in Nevada, you should file your case in Las Vegas or Reno.
The means test is a critical element in determining your qualification for bankruptcy in Nevada. The test compares your income to the median income for a Nevada household of your size. If your income is lower than the state median income, you’ll be eligible to file for Chapter 7 bankruptcy. You can still qualify for Chapter 7 bankruptcy even if your income exceeds Nevada’s median income, if your disposable income isn’t enough to repay your debts.
People who can’t qualify for a Chapter 7 bankruptcy due to higher income may be eligible to file under Chapter 13. You should have a steady income that can cover your debt payments under a repayment plan to be eligible for Chapter 13 bankruptcy. Your unsecured and secured debts shouldn’t be worth more than $465,275 and $1,395,875 respectively.
What Are Bankruptcy’s Effects on Your Debts?
For many, the most significant benefit of filing for bankruptcy is the discharge of your debts. Discharging a debt means releasing a debtor from personal liability for the debt. When you successfully complete your bankruptcy case and have a debt discharged, your obligation to pay the debt is eliminated.
Does bankruptcy clear all debt? The impact that bankruptcy will have on each of your debts is one of the most important questions to ask a bankruptcy lawyer. Not all debts are dischargeable in a Nevada bankruptcy. The main factors that determine whether a debt is dischargeable include the type of debt and when you incurred the debt.
What Is Considered Dischargeable Debt in Nevada?
A variety of debts can qualify for a bankruptcy discharge in Nevada.
Bankruptcy should reflect a debtor’s financial situation at the time of filing. A debt can only be dischargeable if it was incurred before your bankruptcy filing.
Unsecured debt isn’t backed by collateral. Bankruptcy can discharge most of your unsecured personal loans. Debts owed to friends and family members can be dischargeable. Other types of unsecured debt that are often discharged in bankruptcy include:
- Credit card debt: Credit card debts are often considered non-priority unsecured claims in bankruptcy cases. Both Chapter 7 and Chapter 13 bankruptcies can lead to their discharge. However, bankruptcy can impact your ability to acquire and use credit cards.
- Medical debt: Several studies have found medical debt to be the leading cause of bankruptcies in the United States. Medical bills are typically not secured, allowing them to be discharged when your bankruptcy concludes.
- Utility bills: You can discharge your old utility bills through bankruptcy. However, the utilities may require extra deposits to offer you new services in the future.
What Are Non-Dischargeable Debts?
There are several forms of debt that generally can’t be discharged through bankruptcy in Nevada. They include:
Any debt incurred after your bankruptcy petition date can’t be discharged. Creditors may still expect you to repay the debts not listed on your bankruptcy petition, even with your ongoing case.
Secured loans can’t be discharged at the end of your bankruptcy case if you avoid paying them while intending to hold onto the property pledged as collateral. You can only keep the collateral if you continue paying the debts.
Most tax debts aren’t dischargeable in bankruptcy.
Student Loan Debt
Student loans are generally not dischargeable in bankruptcy cases. For them to be discharged, you’d have to prove that you and your dependents would experience undue hardship if you continued paying off the loans.
Domestic Support Obligations
Domestic support obligations can’t be discharged through bankruptcy. Debtors will still be obligated to pay court-ordered alimony, child support, and any other debts included in divorce decrees.
Debt Obtained Through Fraud
Bankruptcy doesn’t wipe out loans you obtain by knowingly giving false information, willful and malicious harm, or any other form of fraudulent activity. The creditor will need to file a lawsuit to have the debt ruled as non-dischargeable due to fraud.
You’ll still have to pay personal injury obligations resulting from convictions for driving under the influence.
There are several other examples of debts that can be declared non-dischargeable. As a result, it’s essential to discuss your case with an experienced bankruptcy lawyer.
Bankruptcy can provide much-needed debt relief and help improve your quality of life. Nevertheless, it has short- and long-term consequences. Understanding the long-term impact of filing for bankruptcy is essential for deciding whether it’s the best debt relief strategy for your circumstances.
What Will Your Credit Be Like After Bankruptcy?
Filing for bankruptcy will hurt your credit score in the short term. It will be hard to get new credit for a couple of years. The accounts you’re delinquent on won’t immediately fall off your credit report after bankruptcy removes your obligation to pay back. However, the report should note that the accounts have zero balances after you receive a discharge.
Chapter 7 bankruptcy cases stay on your credit history for 10 years. On the other hand, a Chapter 13 bankruptcy remains on your credit report for seven years.
Bankruptcy may be your best option for better credit in the long run. Without filing for bankruptcy, you may keep defaulting on debts and increasing the amount of your outstanding debt. When you declare bankruptcy and wipe out many of your old debts, you could resolve your financial issues sooner than with other debt-relief options, leaving you better placed to pay your loans and bills on time and rebuild your credit.
Impact of Bankruptcy on Future Financial Decisions
When your debts are discharged, you’ll need to take care not to incur new debts that you can’t afford. That will help you improve your credit. What’s more, there’s a waiting period of several years required before you can refile for bankruptcy. Check your credit report to ensure discharged debts don’t remain outstanding on the report.
A bankruptcy attorney can help you determine how the bankruptcy process will affect your lifestyle. He or she will assess your situation and guide you on mitigating bankruptcy’s negative effects and rebuilding credit. Your lawyer will simplify the filing process and be by your side through each step to enable you to improve your financial health.
But how much does a bankruptcy lawyer cost in Nevada? The cost usually depends on the type of bankruptcy filed, your assets, and the time taken on your case. Many Nevada bankruptcy lawyers offer free initial consultations, where you can learn more about their costs and how does bankruptcy clear all debt, among other things.