For the most part, bankruptcy results in the discharge of debts owed by the person filing the bankruptcy. In a perfect world, the debtor could walk away with a completely clean slate and no debts.
However, some simply cannot go away, no matter what type of bankruptcy is being filed.
1. Child Support Or Spousal Support
One of the main debts that will not be discharged in any bankruptcy case involves child support or spousal support. These obligations normally cover what public policy and the courts believe is enough to meet the basic living requirements for the debtor’s minor children or former spouse.
Because these obligations are issued by the court for this support and are considered a matter of important public policy, bankruptcy courts do not discharge these debts once the bankruptcy is finalized.
In fact, these obligations are not even part of the automatic stay started once the filing is made.
2. Income Tax Debts
Bankruptcy will not discharge money owed under income taxes, although it may seem like a tempting possibility. Even if it were possible for the debtor to get his or her unpaid income tax debt discharged, getting to that point is tough and requires a great deal of proof of undue hardship.
3. Other Government Obligations
In addition to income taxes, other liabilities owed to the government, including fines or penalties, will not be discharged.
These debts are obviously given priority since they are owed to the government, and the government does not want debtors to use bankruptcy as a means to gain the system. Therefore, they stay with the debtor.
4. Student Loan Debt
Similarly, student loans are not dischargeable through bankruptcy for the most part.
These debts may not be considered “priority” or be secured or attached to an asset, but unless the debtor can show that he or she has an “undue hardship” in them not being discharged, which is difficult to do, these debts will follow them once the case is finalized.
5. Debts For Personal Injury Or Wrongful Death Caused Due To Intoxication
Public policy requires that certain debts stay on a debtor’s record and not be discharged. Child support is one of these, but so are any debts or judgments the debtor owes due to a personal injury lawsuit or wrongful death lawsuit caused due to the intoxication of the debtor.
The law takes these matters very seriously and requires the debtor to hold true to these debts even if he or she is facing default and bankruptcy.
6. Debts From Fraud, False Representation, Or False Pretenses
If the debtor obtained certain debts through dishonesty or fraud, these debts may not be able to be discharged. One of the main reasons for this rule is that many individuals try to “work the system” and purchase items or build debt when they have no intention of paying them.
However, the key is the creditor has to dispute the debt being discharged for this to happen. Unless the bankruptcy trustee has any reason to believe that a debt was obtained through fraud, the debt would normally be discharged.
It would only be until a creditor files an official objection to a debt being discharged that it could be flagged as the product of fraudulent acts or misrepresentation.
7. Debts Not Listed In Asset/Debt List
When the debtor files for bankruptcy, he or she has to fill out a great deal of paperwork which involves listing all assets and debts he or she has and submitting proof of these debts for the bankruptcy trustee to review.
If the debtor has an asset case where money is available to distribute to creditors from that asset, and he or she does not list it or the corresponding debt, that obligation cannot be discharged. All debts must be listed when filing for bankruptcy.
If a debtor leaves a debt out intentionally, all that can result in is the bankruptcy court denying the petition completely. In the end, it is best to be honest from the beginning and list all debts that are on the debtor’s record.
Contact The Bankruptcy Team Of Collins & Arnove Today
Facing a bankruptcy can be an intimidating process. We are here to help you through it. If you have any questions about what debts can be discharged in bankruptcy and what debts must stay on your record, Collins & Arnove can help you.
To learn more and schedule your free consultation call (972) 516-4255 today.