Being approved for bankruptcy is often a huge relief for persons who realize that they are no longer capable of meeting their debts with their disposable income. Bankruptcy essentially makes it possible for you to discharge your debts and start a new.
Note though that the law is fairly strict when approving bankruptcy petitions, regardless of what type it happens to be. Furthermore, there are some debts that are not simply discharged together with a bankruptcy. These nondischargeable debts still bear the necessity of payment regardless of the court’s decision. Note that the items of nondischargeable debt vary depending on your Bankruptcy Chapter.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is essentially a complete write off of debts, EXCEPT for the following:
- Domestic support obligations which includes alimony and child support;
- Taxes along with tax liens;
- Any student loans accrued over the years must still be paid;
- Debts arising from willful and malicious injury, fines and penalties payable to governmental units, and liabilities attributed with larceny or embezzlement;
- Debts payable due to fraud or those arising from wrongful death or personal injury suit involving the operation of vessels while intoxicated;
- Unscheduled debts;
- Fees and assessments attributed to corporations and associations.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is essentially a rearrangement of the repayment plan, giving debtors the chance to schedule compensation of their debts. Under Chapter 13, creditors may not be paid in full. However, the nondischargeable debts listed below still need full compensation regardless of the bankruptcy petition:
- Any pending student loans;
- Any debt incurred through misrepresentation, false pretenses, and fraud;
- Unscheduled debts or those that were not declared in connection with the bankruptcy petition;
- Any interest incurred over debts deemed nondischargeable;
- Fines and restitutions;
- Debts incurred by final judgments over personal injury cases, wrongful death, and willful and malicious injury;
- Withholding taxes for employers;
- Taxes in connection with tax evasion fraud in tax returns;
- Nondischargeable debts as defined in other laws.
Generally speaking, all debts not mentioned above can be discharged under Chapter 7 and 13. However, there are instances when a debt may NOT be discharged because a creditor specifically objected to the action. In order for this to be approved by court, the following situations must be present:
* Debts obtained through fraud
* Willful and malicious injury debts done to the personal property of another
* Any credit card purchases more than $650 and payable to just one creditor. The purchase must be for a luxury good and charged within 90 days after filing the petition for bankruptcy.
* Any cash advances within 70 days after filing a petition for bankruptcy, totaling to more than $925
Note that in the last two cases, the burden of proof lies on the petitioner. Hence, if you can prove that you intended to pay the debt or that your purchase isn’t a “luxury good,” then the court may dismiss creditor objection and let you discharge the liability.
Chapter 7 and 13 are only two of the bankruptcy types that may be obtained by US citizens. If you’re filing for other bankruptcy Chapters, then there’s a good chance that you’ll encounter a different list of nondischargeable debts. Consult your bankruptcy lawyer thoroughly regarding this concern to ensure that you won’t miss a thing.