What Debts Are Not Discharged In Bankruptcy?
If you’re facing financial hardship because of overwhelming debts, one of the options that can help you start over financially is filing for bankruptcy. Usually, the aim of filing for bankruptcy is to obtain a “discharge” of debts. When debts are discharged, it means you are no longer obligated to pay back those debts. However, while bankruptcy can discharge many debts, some debts cannot be discharged in bankruptcy. Depending on your debts, bankruptcy may fail to accomplish its primary purpose: eliminating debt. Therefore, you need to understand what debts cannot be discharged in bankruptcy before starting the filing process.
What Is a Discharge?
A discharge in bankruptcy releases you (the debtor) from personal liability for certain types of debts. When you get a bankruptcy discharge, creditors are prohibited from taking any form of collection action on discharged debts.
It is crucial to note that the timing of the discharge differs depending on the type of bankruptcy you file. If you file a Chapter 7 bankruptcy case, your debts will be discharged upon expiration of the time set for filing a complaint objecting to discharge and the time set for filing a motion to dismiss your case for substantial abuse. If you file a Chapter 13 bankruptcy case, you will be granted discharge as soon as practicable after you complete all payments under the payment plan.
Which Debts Cannot Be Discharged in Bankruptcy?
As already mentioned, not all debts are dischargeable in bankruptcy. According to Congress, some debts cannot be discharged in bankruptcy for public policy reasons. If a debt is not discharged in bankruptcy, you still need to repay that debt after bankruptcy. However, it is possible to have a non-dischargeable debt discharged. Generally, you must show extraordinary circumstances to convince the court to discharge a non-dischargeable debt. Also, some non-dischargeable debts can be discharged if certain legal requirements are met.
The following are some of the debts that generally cannot be discharged in bankruptcy;
- Most taxes
- Alimony or child support
- Some unlisted or improperly listed debts
- Student loans that are guaranteed debt by the government (excludes some private loans)
- Fines or penalties owed to government agencies
- Attorney’s fees for child custody or support that were judicially determined by a state court to be part of domestic support obligation
- Personal injury or wrongful death debts caused by drunk driving
- Criminal restitution and other court fines/penalties
This is not an exhaustive list of the debts that cannot be discharged in bankruptcy. If you are considering bankruptcy, an attorney can help you assess which of your debts can be discharged and which are non-dischargeable.
Taxes and Student Loans
Taxes and student loans are generally not dischargeable in bankruptcy, but it is possible to have these debts discharged if you meet certain legal requirements. As it pertains to taxes, they may be discharged if;
- They are income taxes
- They are at least three years old
- You didn’t commit fraud or tax evasion
- The debt was assessed at least eight months before you filed bankruptcy
On the other hand, you may be able to have your student loans discharged if;
- You have so far made a good faith effort to make payments
- Continuing to pay the debt would cause you undue hardship
- The undue hardship is likely to continue for most of your repayment plan
Even if your student loans are not dischargeable in a bankruptcy court proceeding, there are other avenues available to in terms of repayment plans and federal discharge or forgiveness applications that may be available to certain borrowers. See e.g., website at https://studentaid.gov/manage-loans/forgiveness-cancellation
Contact an Experienced Lehighton & Carbon County Bankruptcy Attorney Today
If you are considering bankruptcy and need legal guidance, contact an experienced Lehighton & Carbon County bankruptcy attorney at Adam R. Weaver, Esq. We can answer all your questions and guide you through the bankruptcy process. Contact us at 570-818-4888 to schedule a consultation.