When you file a bankruptcy, the end goal is to receive a bankruptcy discharge (a.k.a. freedom from your debts). The bankruptcy discharge releases you from the legal liability to repay all debts that are discharged through your bankruptcy case. Post-bankruptcy-discharge your creditors are prohibited from attempting to collect discharged debts, including but not limited to contacting you to request payment of a discharged debt, filing or continuing a lawsuit or turning the debt over to a debt collector for collection.
There are, however, some debts that are not subject to the bankruptcy discharge. Congress specifically exempted several types of debts from the bankruptcy discharge due to the nature of the debt or the greater public good. Even though you may owe debts that are non-dischargeable, filing a bankruptcy can still help you by erasing debts that are dischargeable so that you have more disposable income to make payments toward debts that are non-dischargeable.
Below are three of the most common types of non-discharge debts that debtors owe.
#1: Domestic Support Obligations
Child support and alimony are not subject to a bankruptcy discharge. Because every parent has a legal obligation to contribute to the financial support of his or her child, Congress exempted domestic support obligations from a bankruptcy discharge. If a debtor files a Chapter 13, the debtor can add past due child support or alimony to the bankruptcy plan to catch up these payments through the plan; however, the arrearage must be paid in full through the plan and the debtor must remain current on all future payments.
#2: Student Loans
Student loans are non-dischargeable under the bankruptcy code unless the payment of the debt would cause an undue hardship for the debtor and the debtor’s dependents. Even though the clause of “undue hardship” is in the bankruptcy code, it is very difficult to meet the requirements of undue hardship to obtain a discharge. For this reason, most debtors are unable to erase their student loans through bankruptcy.
However, filing a bankruptcy may still help the debtor by discharging other debts. This discharge creates more disposable income to pay the student loans. In a Chapter 13 case, student loans will be deferred, allowing the debtor to reorganize his or her debts in order to resume payments on the student loans at the end of the Chapter 13 plan.
While in most cases student loans are not subject to the discharge, you should discuss your specific case with an experienced bankruptcy attorney. They can help you determine if you meet the requirements of undue hardship to qualify for a discharge of your student loans.
#3: Personal Injury While Intoxicated
Congress specifically excluded damages that a debtor may owe as a result of the death or personal injury caused by the debtor while operating a motor vehicle, boat or aircraft while intoxicated from using alcohol, drugs or other substances. For example, if the debtor has a judgment against him because he was driving drunk and caused a serious accident, that judgment would not be eligible to be discharged in bankruptcy. This prevents individuals who negligently cause an injury due to driving while intoxicated from erasing that liability by filing a bankruptcy case.
Bankruptcy is intended to give the debtor a fresh start so that he or she can recover from a financial crisis. Even though there are some debts that are not eligible for discharge in bankruptcy, most debtors are able to erase all or most of their debts through bankruptcy. The average debtor has very few, if any, debts that are not dischargeable. Therefore, the laws are written to discharge most debts in order to accomplish this goal.
Don’t rule bankruptcy out if you owe a debt that is not eligible for discharge through a bankruptcy case. Filing for bankruptcy relief can still help you recover financially so that you can pay off the non-dischargeable debt and move forward. Plus, bankruptcy attorneys know the laws best, so trust them to determine whether or not you meet eligibility and/or undue hardship requirements.