What debts are not discharged by filing bankruptcy?

Bankruptcy allows debtors to discharge certain qualifying debts and eliminate their personal responsibility for repay them. After the bankruptcy is complete and the debts have been discharged, creditors are prohibited from continuing any type of collection action on the discharged debts. Actions which are not allowed can include harassing telephone calls, personal contact and letters requesting debt payment.

Debts not discharged

Debts which are not eligible for discharge are listed under the Bankruptcy Code 11 U.S.C. §523. It is important to contact a bankruptcy lawyer prior to filing bankruptcy to discuss your debts and whether or not bankruptcy is a good option. Debts not discharged include the following:

1. Fraudulent Actions

Money the debtor created through fraudulent actions including debts accumulated by the filer to pay for unnecessary luxury goods within a certain number of days from filing for bankruptcy. This is considered fraudulent because the courts will assume the debtor had no intention of paying for them. Debts incurred from larceny, breach of trust or embezzlement are also not discharged.

3. Student Loans

Student loans are generally considered not dischargeable. If a debtor has substantial student loans and has questions about whether they should be included in their bankruptcy they should talk to a bankruptcy lawyer. The court may allow the discharge of the loans but debtor must prove that paying the loans will impose an “undue hardship” to such an extent that the debtor will not be able to maintain even a minimal living standard. This is a very tough burden to prove.

4. Child Support and Spousal Support

Filing bankruptcy will not eliminate the debtor’s financial obligations to pay either spousal support or child support. These debt obligations are considered priority debts, and if the debtor has filed Chapter 13 Bankruptcy, the payments will be added to the debtors Chapter 13 debt repayment plan.

5. Current tax obligations

Some taxes cannot be discharged. For example, taxes due within 3 years from the date the debtor filed for bankruptcy or which were assessed by the IRS in less than 240 days from the bankruptcy filing date may not be discharged. Taxes that were filed within two years of filing for bankruptcy are also not dischargeable. If the debtor has been charged additional tax penalties or fines from tax evasion or fraud these debts are also not dischargeable.

6. Debts from willful and malicious injuries to persons or property

7. Debts for personal injuries

Debts for personal injuries which are caused from the debtor’s operation of a motor vehicle while under the influence of alcohol or drugs are not dischargeable.

Chapter 13 Bankruptcy allows for a broader discharge of debts than Chapter 7 Bankruptcy. Chapter 13 Bankruptcy may allow for the discharge of debts for willful or malicious injury, debts arising from settlement issues in a divorce and debts associated with paying non-dischargeable tax obligations after completing the debt settlement plan. Certain debts may also be discharged if the debtor can prove “hardship”.

Hiring a Bankruptcy Lawyer

Filing a simple, no asset Chapter 7 Bankruptcy may be possible without a bankruptcy lawyer, but most bankruptcies should be filed only after consulting with a bankruptcy lawyer. Bankruptcy laws vary by states. Talk to a bankruptcy attorney to make sure filing bankruptcy is right to solve your financial crisis.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.