Declaring a chapter 7 bankruptcy is a method of leaving your debt behind, and making a fresh financial start. No matter how you got yourself in a financial bind, the law allows you to begin again, with certain exceptions.
While nearly all types of debt can be discharged with chapter 7 bankruptcy, there are 7 important types of debt that cannot be included in a bankruptcy filing. If you are considering filing, read on to find out what cannot be discharged.
The following types of taxes cannot be discharged in chapter 7 bankruptcy:
- Payroll taxes
- Penalties due for fraud
- Taxes based on a fraudulent return
- Liens on property that were placed before the bankruptcy was declared
- Taxes owed for income tax for the past three years
Are Loans Discharged?
Student loans, whether private or a loan backed by the federal government, cannot be discharged unless you can show that doing so would burden you with undue hardship. The hardship must meet 3 conditions:
- The debtor would not be able to maintain a certain standard of living.
- The debtor has additional financial hardships likely to last for the loan's repayment period.
- The debtor has made a demonstrated effort to repay the loan up to this time.
What About Child Support?
Child support is never discharged and child support collectors can continue to attempt to collect any debt owed, including the use of wage garnishment and placing liens on property not included in the bankruptcy. Alimony or spousal support must also continue to be paid, unless you can show that doing so would impose an undue hardship.
Keep in mind that the trustee will consider the undue hardship placed on your ex-spouse, as well.
Debt you owe as a result of a lawsuit
If a court has ordered you to pay as a result of a court action, you must continue to meet this obligation. Court fees are also exempted from discharge.
Debt you owe due to fraud or embezzlement
In fact, any debt, penalties or restitution owed as a result of any criminal activity cannot be included in a bankruptcy.
Debts you failed to list on the bankruptcy petition
Be thorough and complete with your debt listing, you cannot go back and add them once the case is set for hearing.
As you can see, most common debt such as credit card and personal loan debt can be discharged. Consult with your bankruptcy attorney for details on the above debts, since some, especially the tax debts, are extremely complicated and time-dependent. Your attorney will be able to assist you with drafting the petitions for relief on debts such as the student loan debts as well.
Still have questions? Want to know more? Try contacting a company like http://www.howardgoodmanlaw.com/ for more help.