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NON-DISCHARGEABLE DEBTS IN BANKRUPTCY
Bankruptcy allows you to eliminate credit card debt, medical bills, repossessions, and personal loans. Most debts are dischargeable in bankruptcy. There are certain debts that the bankruptcy code exempts from discharge. The debts that can’t be discharged in bankruptcy are called non-dischargeable debts. Nondischargeable debt is a type of debt that cannot be eliminated through bankruptcy proceedings. These debts you are responsible even after bankruptcy. These debts are considered non-dischargeable mainly due to public policy reasons. The most common types of non-dischargeable debts are tax liens, student loans, and alimony. If you file for Chapter 7 bankruptcy, you will be responsible for repaying these debts even after your bankruptcy discharge. In Chapter 13 you may either be responsible for repaying these debts after your Chapter 13 plan, or you may be required to repay all of the non-dischargeable debt as part of the Chapter 13 plan if the debt is a priority debt.Debts that are considered non-dischargeable include:
1. Back taxes 2. Debt resulting from false pretenses, fraud, and false misrepresentation. 3. Debts not listed or scheduled in the bankruptcy case, which did not allow the creditor sufficient time to file a proof of claim. 4. Debts for fraud in a fiduciary capacity, embezzlement, or larceny 5. Child Support or Alimony 6. Fines, penalties or forfeitures that are owed to the government 7. Debt or judgment resulting from the death or personal injury of a person involving the operation of a motor vehicle while intoxicated. 8. Restitution that is part of criminal sentence 9. Debt incurred to pay taxes that where not dischargeable 10. Homeowner association fees that accrue after the filing of your bankruptcy case and before the home is foreclosed. 11. Debts owed to a former spouse or child as part of divorce or separation. 12. Student Loans 13. Condominium or cooperative housing fees In some cases the creditor will be required to take some action in order for the debt not to be discharged as part of your bankruptcy. Some debts are considered generally never dischargeable as part of a bankruptcy case, and other debts may qualify for discharge if they meet certain specific requirements.What Happens to Debts That Are Not Discharged in Bankruptcy?
If your debt is not discharged as part of your bankruptcy case, then you will still be legally responsible for repaying the debt to the creditor. After your bankruptcy case, you can try to work out a payment arrangement or settlement with any creditor whose debt was not discharged as part of your bankruptcy case. If you fail to take any action to resolve the non-dischargeable debt, then the creditor will have a right to seek collection against you, including filing a lawsuit in court, garnishment of wages, and levying against a bank account. If the debt is not dischargeable and is a priority debt in your Chapter 13 plan, then you will be required to pay the debt in full as part of your Chapter 13 bankruptcy plan. Generally income taxes and child support and alimony payments are considered priority debts that must be repaid in full as part of your Chapter 13 bankruptcy case.Non-Dischargeable Debts Frequently Asked Questions
The following frequently asked questions explain how bankruptcy treats debts that may survive a Chapter 7 or Chapter 13 discharge. Every situation is unique, so speak with an experienced bankruptcy attorney about your specific circumstances.
What are non-dischargeable debts in bankruptcy?
Non-dischargeable debts are obligations that are not eliminated by a bankruptcy discharge. You remain legally responsible for paying these debts after your bankruptcy case ends.
Are most debts dischargeable in bankruptcy?
Many unsecured debts, including qualifying credit card debt, medical bills, and personal loans, may be discharged. Certain debts are excluded from discharge under federal bankruptcy law.
Are child support and alimony dischargeable in bankruptcy?
No. Domestic support obligations such as child support and alimony are generally not dischargeable in either Chapter 7 or Chapter 13 bankruptcy.
Are student loans dischargeable in bankruptcy?
Student loans are generally not discharged unless you prove undue hardship through a separate court proceeding.
Are tax debts dischargeable in bankruptcy?
Some older income tax debts may qualify for discharge if strict legal requirements are met. Many recent taxes and tax liens are not dischargeable.
Can debts caused by fraud be discharged?
Debts arising from fraud or false representations may be declared non-dischargeable if the creditor successfully challenges the discharge.
Are debts from embezzlement or larceny dischargeable?
Debts resulting from embezzlement, larceny, or certain fiduciary misconduct may not be discharged.
Are debts for willful and malicious injury dischargeable?
Debts arising from willful and malicious injury to another person or property may be non-dischargeable.
Are drunk driving injury debts dischargeable?
Debts for death or personal injury caused by operating a vehicle while unlawfully intoxicated are generally not dischargeable.
Are criminal fines and restitution dischargeable?
Criminal fines, penalties, and restitution obligations are generally not dischargeable.
What happens if I fail to list a creditor?
Depending on the circumstances, an omitted debt may remain non-dischargeable if the creditor did not receive proper notice.
Are divorce-related debts dischargeable?
Some divorce-related obligations may remain non-dischargeable, especially domestic support obligations.
Are homeowner association fees dischargeable?
Certain post-petition HOA or condominium assessments may remain your responsibility while you retain ownership of the property.
Are secured debts dischargeable?
A bankruptcy discharge may eliminate your personal liability, but valid liens generally remain attached to the collateral.
Are government fines and penalties dischargeable?
Many fines, penalties, and forfeitures owed to government agencies are not dischargeable.
Can debts incurred to pay non-dischargeable taxes be discharged?
Certain debts incurred to pay non-dischargeable taxes may also remain non-dischargeable.
How are non-dischargeable debts treated in Chapter 7?
A Chapter 7 discharge does not eliminate non-dischargeable debts, and collection may resume after the automatic stay ends.
How are non-dischargeable debts treated in Chapter 13?
Many priority non-dischargeable debts must be paid through a Chapter 13 repayment plan.
What is a priority debt in Chapter 13?
Priority debts receive special treatment under bankruptcy law and generally must be paid in full through the repayment plan.
Can a creditor challenge the dischargeability of a debt?
Yes. Certain creditors may file an adversary proceeding asking the bankruptcy court to declare a debt non-dischargeable.
What happens after bankruptcy if a debt is not discharged?
You remain legally responsible for the debt, and the creditor may resume lawful collection efforts.
Can I settle a non-dischargeable debt after bankruptcy?
Yes. You may negotiate a settlement or payment arrangement directly with the creditor.
Does the automatic stay protect me from non-dischargeable debts?
The automatic stay generally pauses collection activity while the bankruptcy case is pending, although exceptions apply.
How can I determine whether a debt will be discharged?
An experienced bankruptcy attorney can review your debts and explain which obligations may or may not be discharged.
Does Ferguson & Ferguson offer free consultations about non-dischargeable debts?
Yes. Ferguson & Ferguson offers free bankruptcy consultations through its Huntsville and Decatur offices.