While filing for Chapter 7 or Chapter 13 bankruptcy can release you of debt and give you a fresh start, this is not true for all types of debt.
You don’t have to worry about consumer debt, like most medical and credit card bills, as these fall under the category of dischargeable bills. However, certain debts, based on Congress’s decision, cannot be wiped out through declaration of bankruptcy.
There are three basic categories of debt that won’t be discharged even if you declare bankruptcy. These include:
- Non-dischargeable debts
- Debts that won’t be discharged unless you prove your case in court
- Debts that will only be discharged if your creditor doesn’t object
It is important to keep in mind that some debts that are non-dischargeable. You will have to pay them off after your Chapter 7 bankruptcy case ends, or you’ll have to pay them in full in your Chapter 13 retirement plan. Basically, there’s no escaping from these debts:
- Alimony and child support
- Fines and penalties you owe the state for breaking the law
- Some tax debts
- Debts you owe as a result of someone’s death or injury due to your intoxicated driving.
Filing for bankruptcy under Chapter 7 means that you will continue to owe condo, coop, and home association fee (HOA). You will also be liable to repay loans from your retirement plan, including additional debts not discharged under a previous bankruptcy.
Debts That Won’t Be Discharged Unless You Prove Your Case in Court
To get certain debts discharged, you will have to convince the court of your inability to pay them. You will also have to meet legal requirements without which you will be forced to pay back the debt. For example:
- Student loans
- Income taxes
Debts That Will Only Be Discharged if Your Creditor Doesn’t Object
There are some debts where you will be at the mercy of your creditor. If your creditor objects or convinces the court that you must pay certain debts at all costs, then you will be obligated to clear your dues. These debts include:
- Debts that arose from fraud
- Debts as a result of luxuries worth more than $725 that were purchased within 90 days of the bankruptcy filing
- Debts as a result of cash advances of more than $1,000 that were withdrawn within 70 days of the bankruptcy filing
- Debts that arose from intentional and malicious practices
- Debts that arose as a result of embezzlement, theft, gambling, or breach of fiduciary duty
- Debts or creditors not mentioned on your bankruptcy papers
The bankruptcy court holds the authority to deny the discharge of a debt, even if it was previously dischargeable. This arises when:
- Perjury is committed
- Failure to account for lost or missing assets
- Destruction of records
- Intentionally hiding property to defraud creditors
- Filing for bankruptcy too soon within a given time frame