Debts That Cannot be Discharged in Bankruptcy
The purpose of bankruptcy is to give people a method for eliminating most of their debts and to get a fresh financial start. When you successfully complete your Chapter 7 or 13 case, you are freed of all debts that are eligible for discharge, such as medical bills, credit card debts and personal loans. Some debts, however, cannot be discharged through bankruptcy. Such debts still exist and you will still be responsible for paying them.
Generally, debts are made nondischargeable because lawmakers believe there are good public policy reasons not to erase them. These debts include but are not limited to the following:
- Child support and spousal support debts
- Attorneys’ fees related to child or spousal support cases
- Debts owed to a spouse or child as part of a divorce
- Fines, penalties or forfeitures owed to the government
- Debts arising from liability for causing personal injury or wrongful death to someone while drunk driving
- Homeowners association fees that accrue after your bankruptcy is filed but before your home is foreclosed upon
- Criminal restitution and court fees
- Student loans
These debts are treated as non-dischargeable without the need for a hearing. However, other debts can be declared non-dischargeable if the creditor mounts a successful challenge in court. For example, a credit card company could challenge the discharge of luxury goods purchases worth more than $650 if the purchases were made 90 days or less prior to the bankruptcy filing. In such a case, the court would hold a hearing and issue a decision after both sides present their arguments. Other examples of debts that are nondischargeable are debts for money, property or services obtained by fraud, debts for willful and malicious injury by the debtor to another entity or the property of another entity, and debts for the violation of any Federal Securities Laws. I have tried and won adversary proceedings involving many of these exceptions to discharge.
Note that if you file Chapter 13, certain non-dischargeable debts will be included within your repayment plan. For example, income taxes, child support and spousal support are generally considered priority debts and are non-dischargeable.
After the bankruptcy is over, it may be possible to work out a settlement or payment plan with creditors who own your non-dischargeable debt. Your bankruptcy attorney can help you work something out in this regard. If you fail to take action and fail to pay the debts, then the creditor would have the right to pursue collection activities and could garnish your wages.
At the Law Offices of Michael Jay Berger in Beverly Hills, our experienced bankruptcy attorneys help people develop and implement comprehensive debt relief strategies. Please call 310-271-6223 or contact us online to arrange a free initial consultation at one of our conveniently located offices.