(Video) Debts That Are And Are Not Dischargeable in Chapter 7

Posted by Wesley Scott on September 10, 2018 at 12:15 PM
Wesley Scott

There are unsecured debts in Chapter 7 Bankruptcy that do not get discharged. Nobody has to object or say a word, debtor remains liable on the debt. Section 523 of the Bankruptcy Code lists a number of exceptions to discharge. In other words, the general rule is debtor’s unsecured debts get discharged or wiped out. However, Section 523 lists those debts that do not get discharged regardless of whether creditor objects or not.

Alimony, child support, sales taxes, student loans, and taxes are not discharged in a bankruptcy case. Now, there are some taxes that are discharged if they are old enough. Still, creditor has to do nothing to preserve that portion of the taxes that are not dischargeable. With student loans, student loans are not discharged in Chapter 7 Bankruptcy. However, debtor can bring an action against student loan company and ask a court for an order discharging the student loan because repaying it would cause debtor an undue hardship. But, student loan company does not need to object, student loans are not discharged in Chapter 7 Bankruptcy unless debtor does something first.

The student loan exception causes a lot of confusion in bankruptcy. First, the student loans must be disclosed because debtor is required to disclose all debts in Chapter 7 Bankruptcy. That leads to hey, are my student loans discharged? No, they are not. Second, when student loan companies stop collecting in the bankruptcy case, because they are banned from collecting debtors sometimes think maybe the student loans are discharged. They are not.

The only way to discharge a student loan in bankruptcy is to bring an adversary case against student loan company and get a judge to agree that repayment of the student loan would cause you, and your dependents, undue hardship, and therefore, the student loans should not be excepted from discharge.


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Topics: Chapter 7 Bankruptcy, Filing Bankruptcy, MN Bankruptcy

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