Bankruptcy is a highly efficient form of debt relief that can legally eliminate many of your debts. There are exceptions to this, however, as some types of debts that are not eliminated or "discharged" in bankruptcy. These debts include family obligations, student loans, and debts incurred from court fines or personal injury cases resulting from operating a motor vehicle while intoxicated. Let's further examine each of these types of debts and explain any exceptions.
Alimony and Child Support in Bankruptcy
It's universally understood that bankruptcy courts won't discharge your alimony or child support payments. Typically, when you file bankruptcy an automatic stay begins, which prevents creditors from pursuing any debts during the course of your bankruptcy, but it does not prevent or delay the collection of child support or alimony from property that isn't included in your Chapter 7 bankruptcy estate. In a Chapter 13 bankruptcy, your family support obligations are a "priority debt". While you can't eliminate these forms of debt, filing bankruptcy can eliminate other non-priority, unsecured debt, which improves your ability catch up on missed child support or alimony payments. In a Chapter 13 bankruptcy case, it's very important to stay current on child support payments as you won't receive a discharge of your other debts if you don’t make your payments.
Student Loans in Bankruptcy
While the US Congress and House of Representatives have recently been debating whether or not to allow student loans to be considered in bankruptcy, for the time being, it is very difficult, if not impossible to discharge student loans in bankruptcy. Still, some individuals who can prove a hardship if forced to pay back their student loans have been able to successfully discharge some or all of their student loans. First, debtors must prove to a US Bankruptcy court that they weren't able to maintain a basic standard of living, that the hardship would last for most of their lives, and that they honestly tried to repay the student loans. Talk to your bankruptcy attorney about your student loans in bankruptcy and whether they believe you have a strong hardship case.
Other Types of Non-Dischargeable Debts in Bankruptcy
If you have incurred debt due to a divorce or have attorney fees associated with a child custody or support case, it isn't dischargeable in bankruptcy. Additionally, if you have a debt that was the result of court fines or penalties, or from personal injury debt caused by intoxicated driving, you will have the pay this money back in full over the course of your Chapter 13 bankruptcy. Debts owed for certain taxes or government agency fines or penalties are also not dischargeable.
Objections to Discharge in Bankruptcy
While unsecured debt such as medical bills or credit card debt is usually dischargeable in bankruptcy, the creditor that holds the debt may bring an objection to you discharging of the debt using bankruptcy for a few reasons. They must file a motion with the bankruptcy court and then approved by a bankruptcy judge to successfully prevent a discharge. The most common reason for objections to discharge are credit card purchases and cash advances make near the filing of your bankruptcy petition. For this reason, it's very important to watch how you spend credit leading up to bankruptcy and to keep excellent records if an emergency purchase becomes necessary before you file your bankruptcy petition.
Non-dischargeable Bankruptcy Debt
No two bankruptcy cases are the same as individuals have different forms of debt, different life experiences, and different types of property. Additionally, each state has its own unique way of dealing with certain types of debts. Working with a California bankruptcy attorney will not only offer you insight into how the bankruptcy court in your district operates but should maximize the amount of debt you discharge and the amount of property you keep. Contact your bankruptcy lawyer today to discuss your options for debt relief.