What debt cannot be discharged when filing for bankruptcy?. Even though filing for bankruptcy frees you from many debts, not all debts go away.
These debts that will not go away even if you file for bankruptcy are known as non-dischargeable debt.
The objective of both Chapter 7 and Chapter 13 bankruptcy is to get a “discharge” of debts. If Filing For Bankruptcy and the bankruptcy court happens to discharge your debts in bankruptcy, it implies that you will no longer be held personally accountable for these debts. The debts that are mostly dischargeable are consumer debts like medical bills and credit card bills. On the other hand, certain debts are non-dischargeable, which means they cannot be wiped out through bankruptcy. These comprise debts that Congress has decided should not be discharged for public policy reasons.
Categories of Non-Dischargeable Debts
Non-dischargeable debt, are in 19 categories. What this means is that when you get a discharge of your consumer debts, creditors will still be able to collect these categories of debts. While some non-dischargeable debts are not subject to a hearing, other non-dischargeable debts will be discharged if a creditor does not challenge that they are dischargeable.
Normally, you will have to show extraordinary circumstances, in order to get these debts discharged and they are generally non-dischargeable.
- Condo, cooperative housing fee debts.
- Secondly, Criminal restitution as well as other court fines or penalties.
- Thirdly, Attorney’s fees for child custody or support.
- Also, Debts you left off your bankruptcy petition, except the creditor actually knew of your filling.
- Various types of taxes.
- Child support or alimony.
- Fines or penalties that are owed to government agencies.
- Student loans.
- Personal injury debts as a result of a drunk driving accident.
- Lastly, Debt as a result of tax-advantaged retirement plans.
A creditor must challenge your discharge during the bankruptcy for it to be non-dischargeable. Then, the court will hold a hearing that allows both the bankruptcy filer. And the creditor to present their arguments. On the other hand, if the creditor fails to object. Or if the court disagrees with the creditor, the debt will be discharged. These include credit card purchases for luxury goods worth more than $650 in aggregate. That was made during the 90 days preceding the filing and are owed to a single creditor. Or obtained debts or those or debts that are obtained under false pretenses, and debts incurred as a result of willful and malicious injuries either to person or property.
Debts Difficult to Discharge in Bankruptcy
One of the most difficult debts to discharge in bankruptcy is student loans. You can only discharge this loan if you can demonstrate undue hardship to yourself or your dependents, like being unable to maintain a minimal standard of living. In some cases, a court may discharge part of your student debt but not all of it. Thus if student loan debt is your major reason for considering bankruptcy you have to do this. First, contact your loan servicer and see if it’s possible to negotiate a repayment plan that would work for you. If it is a federal student loan, several such plans are available.
Secondly, you cannot have income tax debts discharged without an exemption. This can only be obtained by the bankruptcy court and explaining you deserve relief. Therefore, if you have income tax debts that you cannot repay, it may be best for you to consult with a tax attorney, even before you file for bankruptcy, to discuss your options.
When it comes to federal taxes, which offers several options for people who are unable to pay what they owe. One of which is an offer in compromise, where the IRS agrees to accept a lesser amount. The IRS may also arrange for a payment plan, which enables you to pay your taxes over a period of time.
In summary, it is worth mentioning that your creditors also have some powers to stop certain debts from being discharged. They can also ask the court for relief from the automatic stay, which prevents them from pursuing collection activity. Thus, before you file for bankruptcy, weigh your options right and get acquainted with the kind of discharge you are looking for and what applies.