What Debt Cannot Be Discharged In Bankruptcy?
Bankruptcy can often free you from many different types of debts but there are certain debts that you will be unable to free yourself from with the help of a traditional bankruptcy filing. Under Chapter 7 or Chapter 13 bankruptcy there are a number of debts that can be discharged but certain debts which are notoriously difficult to be discharged. The types of debt which do qualify for a discharge under bankruptcy can mean that a creditor can no longer take action against the person that filed. Still wondering what debt cannot be discharged? Here’s a little guide!
The Difference Between Chapter 13 and Chapter 7
In the case of Chapter 7 bankruptcy a trustee is appointed by bankruptcy court to liquidate and sell off your assets in order to pay off your creditors. The debt that you pay off is often just a portion of what you owe but there are certain assets that can be exempt from liquidation in a chapter 7 case. In most of these bankruptcy cases you will be able to include the equity that is built in your home, your clothing, essential tools, and automobile, pensions or your Social Security benefits. Any non-exempt assets will be liquidated by a trustee in order to pay off a portion of your debts and make sure that creditors will not be able to come after you for the debts. Under a Chapter 7 bankruptcy you will be able to have your debts discharged roughly 4 months after you file for your bankruptcy petition. In order to file for Chapter 7 bankruptcy, you need to first pass a means test in which your income will be judged against your debts. If there’s no way that you would be able to reasonably pay down your debts using your income, you can likely qualify for Chapter 7.
A chapter 13 bankruptcy in contrast is an excellent way to pay down your debts over time and settle with your creditor to pay just a portion of your debts. The process of chapter 13 bankruptcy takes between 3 to 5 years and it means that you have to follow a rigid agreement to discharge your debts. You are allowed to keep any type of non-exempt asset and continue paying down your debts in scheduled and agreed-upon monthly payments to the trustee that will distribute these funds to each creditor.
These are solutions that can leave you debt-free and that can work to help you manage issues with debts you may never be able to pay down. When you file for either form of bankruptcy however there are some debts that simply cannot be discharged.
There are 19 categories of debts under the US bankruptcy code that cannot be discharged under any chapter of bankruptcy. The specifics of these discharges vary based off of the discretion of creditors but some of the top examples of debts which cannot be discharged include:
- Child support and alimony payments
- Unpaid taxes such as tax liens (It is possible that some of your federal, local or state taxes may be eligible for a discharge if they are several years old.)
- Debts that include a willful and malicious injury to another person or property damage
- Debts for a personal injury or wrongful death case caused by the debtors operation of a motor vehicle. (This typically only applies to impaired driving charges.)
- Any debt that you failed to list in your bankruptcy filing.
These types of debts are known for being next to impossible to discharge. Because of requirements under federal law you may never be able to establish an agreement to discharge these forms of debt from your bankruptcy claim. This means that if the majority of your debt is locked up in unpaid child support for example, filing for bankruptcy may not be a helpful solution for your finances. There are also some debts which can be quite difficult to discharge because of the agreements that need to be put in place for a discharge.
A student loan is not considered to be a dischargeable debt through typical bankruptcy. If your student loans are the reason you are considering filing for bankruptcy, contacting a loan service could be one of the best ways that you could negotiate a new repayment plan that could lower your costs and interest payment. Consolidating your student loans can also be an excellent way that you can reduce interest charges and work at generating an improvement for your financial situation.
It is important to know what debt cannot be discharged in bankruptcy! If you would like a representative for your bankruptcy to help you discharge more debt and to answer any questions about the debt that you can discharge, contact us today!