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Debt Discharge Tips

Mark Cappel
UpdatedApr 19, 2024

I just received a chapter 7 discharge for my debt, and now have more debt.

I just received a chapter 7 discharge for my debt, and now have more debt. I was unemployed and had a traumatic head injury right after my discharge, I have no income, no job and no insurance, I have accumulated tax debt and emergency hospital bills debt which I have no way to pay, what are my options? I have been denied Social Security disability, etc... Thank you

I am very sorry to hear about the challenges you are facing, both with your health and with your finances.

Thankfully, I can tell you that there are options to assist you in resolving your financial difficulties. The first thing that I would recommend you do is contact your bankruptcy attorney as soon as possible to explain the problems you are facing so he can tell you what assistance he can provide you. It may be possible for your attorney to request that the court re-open your bankruptcy case in order to extend the discharge to the medical debts incurred as a result of your accident. In order to re-open a discharged Chapter 7 case, the court will likely require you to provide a clear and convincing reason as to why it should extend the discharge to your newer creditors. While it is fairly unusual for the bankruptcy court to grant such a motion, given the fact that these debts resulted from a traumatic injury which was outside your control, it is very possible that the court will grant an exception in your case. If the court allows you to re-open your case, you will likely be required to follow a process similar to what you experienced when you initially filed; the discharge of the debts will not be automatic, but it should be somewhat less difficult considering the court previously granted you a discharge of your other debts. Again, I strongly encourage you to consult with your attorney as soon as possible to discuss this option. Your attorney should be able to give you an opinion of the likelihood of your motionÂ’s success, and what alternatives are available if your request is not granted by the court. To read more about bankruptcy, I encourage you to visit the bankruptcy resources page at

Unfortunately, tax liabilities are generally not dischargeable in bankruptcy, which means that you may be forced to pay the tax debts you have incurred since your accident even if you can move the court to reopen your bankruptcy case. However, in extreme cases, in which the payment of the tax obligation would cause an undue hardship on the petitioner, the bankruptcy courts do have the power to discharge tax obligations. You should know that the courts rarely use this power, so you should probably not expect your tax debts to be discharged. You should discuss this possibility with your attorney to find out his opinion and to learn what steps you would need to take to petition the bankruptcy court to discharge your tax debt. Assuming the court will not discharge your tax liability, you will probably want to seek the advice of a tax professional to find out what options are available to you to resolve your back taxes. For example, since you are not able to work and have no other source of income, the IRS (or your state or local tax authority, depending on the type of taxes owed) may be willing to put your account in Â"uncollectibleÂ" status, meaning that the tax agency will not pursue collection because it knows that you do not have income or assets sufficient to satisfy the debt. However, if you have assets which can be liquidated to pay the taxes, the IRS may be willing to accept the value of your non-exempt assets as partial payment of your obligation, a program called an Â"offer in compromise.Â" The options available to you to resolve your delinquent taxes will depend largely on the type of taxes you owe (federal, state, local) and your personal and household financial circumstances. The IRS and other tax agencies are generally willing to work with delinquent taxpayers to help them figure out a way to pay their taxes without the necessity for unpleasant collection efforts. I encourage you to consult with a tax attorney or other tax professional to discuss your finances and what options may be available to help your resolve your outstanding tax debt. To read more about the various types of assistance available to taxpayers struggling with back taxes, I invite you to visit the IRS Debt Help page at

You could also seek out the counsel of a leading tax resolution firm, like Bills friends at Freedom Tax Relief ( )

I understand your frustration with the fact that your claim for disability was denied by the Social Security Administration. Unfortunately, many people apply for disability benefits who do not really qualify, which causes delays and problems for all applicants. These improper applications lead to an abundance of caution on the part of the SSA, and the agencyÂ’s efforts to prevent unqualified claims from being approved often results in valid claims being denied. If your injury has left you unable to work, you may want to dispute the denial of your previous claim. I would encourage you to consult with an attorney who specializes in Social Security appeals to discuss your case; having an experienced attorney assisting with your case could greatly increase your chances of having your disability claim approved on appeal. The Social Security Administration has a website which explains the appeals process in detail, available at

I know that, given your financial situation, it may be difficult to hire attorneys or other professionals to represent you in these various matters; however, the potential benefits of successfully resolving your debts and having your SSD claim approved certainly justify the expense. I would encourage you to take whatever steps necessary to raise the funds needed to enlist qualified professional assistance. Many attorneys and tax professionals will accept their fees in installments, accept reduced fees, and offer other assistance to you given the medical and financial problem you are facing; most will also provide you with a free initial consultation. I wish you the best of luck in resolving your financial struggles, and hope that the information I have provided helps you Find. Learn. Save.



Debt statistics

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Missouri, 29% have any kind of debt in collections and the median debt in collections is $1775. Medical debt is common and 16% have that in collections. The median medical debt in collections is $767.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.



BBill, Aug, 2009
For a no-cost, online quote from pre-screened service providers, click on the consolidate debt page.
KKaye Albright, Aug, 2009
How do you know crediable debt consolidation companies?My situation: I am on SSD have continued medical problems. I had reserved my one main credit card for car repairs, medication refills, medical garage fees, gas to go to MD's and general emergency. My credit card was canceled without notification. I received a letter two weeks later stating to contact Experian. I printed a copy of my credit report and of course the medical bills I could not pay from surgery last year were turned over to collections. Even after my writing hardship letters to each and asking them to take Medicare as payment in full. I was angry with the credit card company and sent them $1.01 payment this month. I had never been late and had always paid more than minimal payment.Today, I received my credit card bill, payment due double, late fee added, etc. Any suggestions?
BBill, May, 2009
If you can confirm that the 1st loan was a purchase money loan, and being that it was your primary residence, you would not be liable to pay deficiencies on either the primary loan or the equity line.As far your second home, you WILL be liable for any deficiencies on both the primary as well as the equity line, as it is not your primary residence and also because you refinanced your loan. The initial lender might sell off these loans to other collection agents, but you will still be liable for them. In California, the lender has 4 years (statute of limitations) to collect on these loans. You can expect these deficiencies to show on your credit for at least 7 years from the date when you first defaulted.
hhartaj, May, 2009
Q:I owned 2 properties in the state of California:-1st property primary residence: paid 10% down financed with 80% and 10% equity line loan. Loan was never refinanced, original purchase money.-2nd property bought for zero down 100%financed, then refinanced with 80%, 10% as a equity line. It was also foreclosed.My question is what would happen to the equity line loans since both properties were foreclosed by the senior liens (80%). What are my liabilities, how long they stay on my records, statute of limitations for the lender to collect or how can settle with the banks. when I called the lender regarding the two equity lines, they said they no longer service those loans.