Bankruptcy Debt
Bankruptcy allows individuals, small businesses, and corporations to discharge certain debts, thus releasing them from liability for specific debts. Certain debts are "secured," meaning they are guaranteed payment from the bankruptcy estate. Other debts are "unsecured," and these debts are assigned different priorities under bankruptcy law. Child and spousal support payments, for example, will be assigned a higher priority than will claims for injury as a result of a DUI. The higher the priority, the more likely the creditor will receive payment from the bankruptcy estate. Not all debts are dischargeable in bankruptcy. Student loan debt, for instance, is typically not dischargeable in a bankruptcy proceeding, with rare exceptions. Although some unsecured debts may be discharged without payment, the debtor may elect to reaffirm the debt with certain creditors, promising to pay the debt that was discharged in bankruptcy. Strict guidelines govern reaffirmation agreements in bankruptcy proceedings.
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