Bankruptcy: Non-Dischargeable Debts

There are certain debts and obligations that can never be discharged in a Chapter 7 bankruptcy.  They are as follows:

All debts that you didn't list on your bankruptcy petition will not be discharged;

Criminal fines and debts  --  All court fees and court-ordered judgments related to any criminal activity cannot be discharged -- neither are any judgments or debts incurred as a result of personal injury or death to others caused by your own negligence or criminal activity;

Student Loans that have been in repayment status for at least seven years.  Although there is a general policy not to discharge student loan debt; in some very rare circumstances, older student loans can be discharged, particularly if a hardship condition exists;

Taxes -- Federal, state and municipal taxes that became due within the last three years;

Fraudulent debts -- Any debt that the court finds was obtained fraudulently or illegally will not be discharged.  For example, if you ran up debt on a credit card shortly before filing bankruptcy (within 60 to 90 days of filing), the court will refuse to discharge that debt.  In addition, if you lied on a loan application to obtain funds -- that related debt will not be forgiven in bankruptcy;

Dischargeable debt you incurred to pay off non-dischargeable debt -- For example, you cannot take a cash advance on a credit card to pay off last year's taxes, just so you can write it off in bankruptcy;

Alimony and child support payments (court-ordered) are not dischargeable;

Divorce and property settlements are not dischargeable unless the other party agrees to it;

Attorney's fees in child support cases is not dischargeable;

Homeowner's Association Fees are not dischargeable;

If you are not a good candidate for Chapter 7 bankruptcy for any of the reasons listed above, you might still be a good candidate for Chapter 13 bankruptcy.  To qualify for Chapter 13 bankruptcy, you must have an income that allows you to pay back your debts over a 3-5 year period and your current debts cannot exceed limits set forth in the bankruptcy code.

Priority debt -- you have a significant amount of priority debt (taxes, wages owed to employees and any social security benefits, pensions, etc.) that would not be dischargeable under a Chapter 7 bankruptcy.  Priortity debt is dischargeable under Chapter 13;

Valuable property -- you don't want to turn certain property over to the bankruptcy trustee for auction.  For example, a diamond ring that is a family heirloom and which exceeds the value of your allowable exemption

Secured debt -- you are behind on your mortgage or car payment, but would like to keep these assets.  Chapter 13 bankruptcy allows you to keep this property and catch up on arrearages

Dishonest activity -- you can get out of paying a significant portion of debt incurred from fraud or malicious and criminal activity in a Chapter 13 bankruptcy.

Although Chapter 13 requires debtors to pay back their creditors over a 3-5 year plan, in reality, unsecured creditors are not paid back in full.  The average unsecured creditor gets about 60% of what is owed him; and some unsecured creditors, like credit card companies, get just pennies on the dollar.  If you fall behind in your payments, you can convert your bankruptcy to a Chapter 7.

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