One of the questions that we commonly hear is whether there are types of debt that cannot be discharged in bankruptcy. Unfortunately for many debtors, there are, indeed, types of common debts that cannot be discharged in bankruptcy, as well as some uncommon types. Over the course of the next several blog posts, we will discuss some of those debts. Note: this is not meant to be an all-inclusive list.
How Do We Know if the Debt Cannot Be Discharged?
There is a section of the Bankruptcy Code (Section 523) that lays out the types of debt that cannot be discharged in a Chapter 7 Bankruptcy. (Though not dischargeable in a Chapter 7, some of the debts in the section, may be discharged in a Chapter 13 bankruptcy, and that will be discussed in a future blog post.)
Common Types of Debt that Cannot Be Discharged in Bankruptcy:
Taxes: Generally speaking, personal income tax debt that were due within the past 3 years prior to filing the bankruptcy, and any business-related tax debt are not dischargeable in bankruptcy. However, if the personal income taxes are 3 years old, or older, they may be discharged in bankruptcy.
Student Loans: Most student loans are not dischargeable in bankruptcy, unless the debtor can show that being forced to pay would constitute an “undue hardship” (a very steep hill to climb). Attempting to discharge student loans requires filing a separate lawsuit against the lender within the bankruptcy itself. Those lawsuits are often costly and ultimately do not succeed in actually eliminating the debt.
Domestic Support Obligations/Other Payments Owed to Former Spouse: Past due, and future, child support payments are not dischargeable in bankruptcy. Additionally, other types of debt to a former spouse that were incurred as part of the divorce/separation order cannot be discharged in bankruptcy.
Fines/Tickets Owed to Governmental Units: Speeding tickets, parking tickets, and other types of fines/penalties owed to the government are not dischargeable in bankruptcy.
A Bankruptcy Can Still Help!!
Although you may have debt that falls into the categories above (maybe even a large amount) a bankruptcy can still help! A Chapter 7 Bankruptcy can help by giving you time to breathe (while the bankruptcy is pending) and by eliminating other debt to help you concentrate on paying one or more of the types listed above. On the other hand, a Chapter 13 bankruptcy can be a useful tool in setting up payment plans on tax debt or past due child support, while also getting the benefit of discharging your other debt. Also, during a Chapter 13, your student loans go into deferment while the bankruptcy is pending!
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
If you are looking at filing, and have questions about the type of debt you have and how we can help, we would be happy to discuss the options with you! When the time is right, or when you are ready to get your life back, reach out to Minnesota’s most kind and helpful bankruptcy law firm by going to www.lifebacklaw.com. You will be so thankful you did!
