Many would be surprised to know that not all debts can be discharged through bankruptcy, particularly given the primary goal in filing either Chapter 7 or Chapter 13 bankruptcy — which is to eliminate the burdens of debt to get a second chance at financial success. Therefore, debtors struggling to keep up with payments should consult with an experienced West Palm Beach bankruptcy attorney to learn how filing for bankruptcy may or may not improve their financial situation.
The types of debt that survive bankruptcy, known as nondischargeable debts, are discussed below.
Debts are secured when creditors have a lien on the debtor’s property and can repossess it if the debt is not paid. Bankruptcy can discharge the borrower from the debt, but it cannot prevent creditors from seizing the debtor’s assets if the debt is not paid. Common actions taken by creditors with secured debts include repossessing a delinquent debtor’s car or foreclosing on a mortgage. In these types of severe situations, consult with a proven West Palm Beach bankruptcy attorney or foreclosure lawyer.
Even though student loans can be discharged, there is a complex process that should be taken with the help of a West Palm Beach bankruptcy attorney skilled at student loan forgiveness litigation. Most borrowers will not qualify for student loan discharge and are unlikely to pass the Brunner Test, which is used to prove that repaying those loans would cause them “undue hardship.” These requirements are very difficult to meet, so student loan debt discharges are often not approved.
Family Support Obligations
Family support obligations, such as unpaid child and spousal support, or even money owed as the result of a divorce settlement, are considered nondischargeable debts. Filing bankruptcy will have no affect on any of these obligations. After a Chapter 7 bankruptcy case ends, these types of debts will remain on a debtor’s balance. If a debtor filed for Chapter 13 bankruptcy, then his repayment plan will stipulate that his family support debts will be paid in full. Even after the completion of the plan, these debts will not be eliminated.
Most tax debts survive bankruptcy. For the possibility of a discharge, debts for unpaid income taxes must meet certain strict requirements. For starters, the taxes must have been due at least three years before the bankruptcy case filing. Additionally, the associated tax return needs to have been filed at least two years before a bankruptcy filing. Finally, the IRS assessment that found the taxes to still be owed must have been made more than 240 days before. Like income taxes, other tax debts may be forgiven but the process is complicated, and thus the help of a bankruptcy attorney is advised.
Other nondischargeable debts include debts that are not listed in the debtor’s bankruptcy papers, compensation owed as a result of personal injury or death caused by a DUI, and fines and penalties imposed for law violations ranging from traffic tickets to more severe punishments.
To learn more about the types of debt that survive bankruptcy and how filing for bankruptcy will affect your financial situation, call the law offices of Kelley and Fulton to speak with an experienced West Palm Beach bankruptcy attorney today.