As discussed previously in this blog, many Colorado residents may become overwhelmed in debt after a sudden incident, like a medical injury or job loss. For others, however, the accumulation of debt occurs over years, with credit cards and other bills stacking up. In either event, Chapter 7 bankruptcy may be a way to break the debt cycle and achieve a fresh financial start.
Fortunately, as long as a person qualifies, the Chapter 7 process does not discriminate as to who can receive its protections. For instance, a person familiar to many Colorado residents recently filed for Chapter 7. Casey Anthony, the mother acquitted of killing her 2-year-old daughter in 2011, filed for bankruptcy, listing $1,100 in assets and $792,000 in liabilities. She is shown as unemployed in her filing, without any income in recent times.
Anthony's filing lists debts of $500,000 for attorney fees and costs associated with her trial. She also listed debts relating to taxes and penalties and other court costs. In sum, she lists about 80 creditors.
Typically, most unsecured debt can be discharged under Chapter 7 bankruptcy. There are certain exceptions, however, including student loans and child support obligations.
As for tax debt, a number of elements must be met in order to discharge the debt. For example, the taxes must be income taxes and there must be no evidence of fraud or willful evasion. Moreover, the debt must be at least three years old, and the person must have filed a tax return. If these circumstances are present, the bankruptcy court may discharge the debt.
Ultimately, the types of debt a person has, and whether they may be discharged, may vary from person to person. Accordingly, it is best to work with an experienced bankruptcy attorney who can guide the person through the Chapter 7 process.
Source: CBS 8, "Casey Anthony files for bankruptcy in Florida," Jan. 27, 2013