When you file for bankruptcy, you expect all of your debts to be discharged. However, this is not always the case. Non-dischargeable debts are debts you can’t eliminate in bankruptcy because the U.S. Bankruptcy Code doesn’t allow it. If you have non-dischargeable debts, chapter 7 won’t get rid of them, but it will get rid of other debts so that you can pay off the non-dischargeable ones.
What are 4 debts that are non-dischargeable when filing for bankruptcy?
Some debts such as taxes, alimony, student loans, and child support are the most common. However, there are times that a creditor can object to the discharge, such as martial settlements, divorce decree, and ones from fraudulent acts.
1. Alimony and child support
Alimony and child support are considered domestic obligations and are not dischargeable through bankruptcy. This is one of those public policy interest exceptions. Also, the automatic stay when you file for bankruptcy doesn’t apply to these debts.
In other words, while going through the bankruptcy process, you’ll still be responsible for making the payments. If your wages are currently being garnished for current or past due to child support, it will continue.
While you can’t discharge past due amounts, filing Chapter 13 bankruptcy will help to get current, and as long as you remain timely on future payments for the non-dischargeable debts, you’ll have eliminated it by paying it off through a Chapter 13 payment plan.
2. Income Taxes
Recent income tax debts are non-dischargeable by filing bankruptcy. Like domestic debts, you can use a chapter 13 bankruptcy payment plan to pay off income tax debts. However, there are times you can eliminate older taxes by filing Chapter 7 bankruptcy but only if specific requirements are met.
The bankruptcy has to be filed more than three years after the tax return was due and more than two years after the return was filed, including valid extensions. In most courts, a late return does not count as a “return,” and you won’t be able to discharge the taxes.
Any taxes assessed 240 days before the bankruptcy filing can’t be removed even if the other requirements are met. Additionally, if the IRS can prove fraud or tax evasion on your part, the tax debt remains non-discharge no matter how old the debt is.
3. DUI Judgements or Malicious Accidents
Neither Chapter 7 or Chapter 13 bankruptcy discharges an individual debtor from any debt for the death or personal injury caused by the debtor’s operation of a motor vehicle if the person was intoxicated from using drugs, alcohol, or another substance. Basically, if you were under the influence at the time of the accident, the other party sued you in civil court and received compensation. In that case, the judgment can’t be discharged through bankruptcy, no matter how large it is.
Willful or malicious accidents that result in injury to another person or property are another exception. An example of this is if you have an issue with a neighbor and willfully run your car into his garden, fence, or vehicle, you are liable for the damage to him or his property.
4. Student Loans
Most of the time, student loans aren’t dischargeable through Chapter 7 bankruptcy. This is true with both Chapter 7 and Chapter 13. However, if you can prove to repay the student loans will create an undue hardship that prevents you from meeting your basic needs, they may be dischargeable, depending on the bankruptcy laws on your state.
In addition, you’ll also have to prove that your current financial hardship is going to continue indefinitely. If you can prove these two requirements, you also have to prove you made a reasonable faith effort to repay the non-dischargeable debt. Most of the time, since people were already behind on their obligations, they usually can’t prove all of these to get rid of the student loans.
Is Personal Bankruptcy Right for You?
This is not the complete list of debts that are non-dischargeable in bankruptcy. Some additional ones are 401k loans, other government debts like fines and penalties, restitution for criminal acts, debts from fraud, and debts purposely not included in bankruptcy forms. To determine what debts are non-dischargeable, make sure to speak with a bankruptcy lawyer for clarity.
Even if you have debts that are non-dischargeable, there is still help. The first step to taking charge of overwhelming debt is to find out if bankruptcy is right for you. Hines Law Offices located throughout the greater Boston area is a trusted bankruptcy law firm that provides sound advice and debt relief options. As a full-service bankruptcy firm, we can help you get back on track so that life can move on without the stress and worry of losing your home, car or paycheck. Questions? Contact our bankruptcy firm to schedule a Free Consultation today.