Can all my debts be discharged by filing bankruptcy?
Certain debts remain to be paid once a bankruptcy case concludes.
Someone who is in debt needs to realize that filing bankruptcy doesn't erase all their financial problems and they may still have some significant bills to pay when the case is concluded.
According to the U.S. Bankruptcy Court, there are 19 categories of debt that are not discharged in a Chapter 7 petition, the most common form of personal bankruptcy. In a Chapter 13 filing, in which the debtor must pay creditors through a court-ordered repayment plan over several years, there fewer exceptions.
"Section 523(a) of the [Bankruptcy] Code specifically excepts various categories of debts from the discharge granted to individual debtors," states USCourts.gov. "Therefore, the debtor must still repay those debts after bankruptcy."
In general terms, the court will not discharge liens such as mortgages or car loans. Property taxes usually aren't discharged, but some federal taxes can be as long as they meet specific conditions set by the court.
The bankruptcy court is especially protective of family support payments and doesn't allow back payments for child support or alimony to be erased in a bankruptcy. The debtor will still be responsible for meeting those obligations throughout the bankruptcy process and after it is concluded.
Debts in the form of fines, penalties or customs duties that are owed to a government agency and any student loans that are funded by the government or a guaranteed backer cannot be discharged.
Secured debt, which is money owed on a bill linked to a tangible asset, cannot be discharged. In effect, those items are considered collateral for the money that is owed and can be taken back by the lender if the loan becomes delinquent.
Most exemptions allowed under state and federal law are large enough to cover a secured debt, such as a house mortgage or a car loan. In cases when the value of those items exceeds the exemption, the debtor may have to sell the property to pay their debt, according to BankruptcyHome.com.
In addition, any debts or fines owed as a result of delinquent or illegal behavior will also not be cleared away through bankruptcy. These include unpaid fines for personal injury or death caused if the debtor was charged with driving under the influence and traffic tickets, as well as court-ordered criminal restitution or any debts that arose from fraud.
"The debtor still has the obligation to pay this debt and the creditor has every right to collect," states FilingBankruptcyForm.com.
Secured and Unsecured Debt
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