Posts Tagged ‘What can be discharged in bankruptcy’
Most people are aware that there are three main debts that are non-dischargeable; (1) Student Loans, (2) money owed to IRS or state taxing agency, and (3) back child support. However, that is not the end of the list. Here are other non-dischargeable debts that are less common, but still important to note:
(1) A judgment against you for a willful and malicious injury (i.e., assault & battery)
(2) An obligation arising from auto accident that involved alcohol
(3) If a creditor alleges false pretenses, false representations, or actual fraud
(4) If a debt is based on a false (or falsified) financial statement (i.e., a lie on a loan application)
(5) Cash advances of $750 or more taken within 70 days of filing
(6) Debts arising while acting as a fiduciary (i.e. embezzlement or larceny)
(7) Fines or penalties owed to a governmental unit
(8) Condominium dues (if the condominium is not surrendered)
LAST – AND MOST IMPORTANTLY
(9) Any debts not originally listed on your bankruptcy petition
The discharge in a Chapter 7 bankruptcy wipes out many types of debt, including unsecured credit card debt, utility bills, back rent, medical bills, uninsured car accident judgments, amounts owed on repossessed or surrendered vehicles, and various other unsecured debts. The discharge accomplishes this by relieving the debtor of personal liability for these debts and preventing creditors from ever pursuing these debts in the future.
However, there are certain types of debt that won’t be discharged in a Chapter 7. These debts include most tax debt, criminal restitution, domestic support obligations such as child support, maintenance, and alimony, most student loans, debts related to drunk driving, and debts incurred by fraud.
Secured debts such as car loans and mortgages can also be discharged in a Chapter 7. This means that if you do not want your car or house you can walk away from these debts in a Chapter 7 bankruptcy. However, valid liens survive the discharge and remain in effect after the bankruptcy. This means secured creditors can still bring actions such as foreclosures and repossessions to enforce valid liens post-bankruptcy. Thus, in order to retain collateral such as a house or a car, Chapter 7 debtors must either reaffirm secured debt or make arrangements to redeem the collateral.