It is a common misconception that people who file bankruptcy get rid of all of their bad debt. Although this would be a wonderful concept, it simply is not true. The U.S. Bankruptcy Code lists the debts that cannot be discharged in a bankruptcy. Some are nondischargeable due to the type of debt, while others are deemed unable to discharge due to improper behavior of the debtor.
The Following Debts are Non-dischargeable Under The Bankruptcy Code:
Spousal or Child Support
Child support, spousal support, and alimony are listed as nondischargeable in a bankruptcy filing. Additionally, any fees that are owed to a lawyer relative to a child support or custody case are also unable to be discharged. If you owe any debts to your former spouse because of a divorce or separation, those are also listed as nondischargeable.
Student Loan Debt
Student loans are common debts nowadays. More than 44 million Americans have student loan debt, amounting to a national debt of 1.5 trillion dollars. Unfortunately, student loans are not dischargeable in bankruptcies. In rare cases, if a debtor filing Chapter 7 bankruptcy can prove undue hardship, there is a slight possibility the student loan debt will be discharged. In Chapter 13 bankruptcy, student loans can be delayed or reduced, but they are very rarely discharged.
Personal Injury Judgments
If a debt is incurred due to a personal injury case in which you were found liable, that debt will not be discharged in your bankruptcy. Often, debts of this type are a result of a car accident and, typically, drugs or alcohol played a role.
Most unpaid taxes are nondischargeable under the bankruptcy laws and federal liens are never discharged. There are exceptions to this rule, however. In order to qualify to discharge taxes in your Chapter 7 bankruptcy, you need to be able to check off the box for five requirements:
- Your bankruptcy is occurring at least three years after the due date of the tax return you owe taxes on.
- The actual tax return was filed more than two years ago.
- The IRS assessed the taxes more than 240 days ago.
- The tax return was not deemed fraudulent.
- The IRS has never found you guilty for tax evasion.
Court Fines & Criminal Restitution
If you have debts from unpaid court fines, they will not be discharged in your bankruptcy. Additionally, any debts incurred from criminal activities, including criminal restitution, will not be discharged.
Not Included in Bankruptcy Petition
It is crucial that you list every single debt that you know about in your bankruptcy petition. If you neglect to list a debt in your petition, the court will not discharge it.
Do not fret your debt situation! Some of your debts may not be dischargeable, but bankruptcy might still be a great option for you. We can help to evaluate your financial situation and determine which type of bankruptcy is the best course of action for you.
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.