Some people dread the thought of filing bankruptcy and they view the filing as a permanent stain on their financial record, while others view filing a Chapter 7 or Chapter 13 bankruptcy filing as a get-out-of-debt-free card. Two truths hold true regarding bankruptcy and they are as follows
- Bankruptcy is not the end of the Earth
- Bankruptcy is no walk in the park
Unfortunately, there are certain debts not discharged in bankruptcy filings.
Bankruptcy is a Fantastic Tool
Bankruptcy is an excellent tool for financial recovery and bankruptcy can be erased from your financial record after a certain time period. You should be aware, however, filing bankruptcy does not offer relief from every single debt you may owe. Here is a list of the following debts that cannot be discharged, or can be discharged in limited circumstances:
Student Loans
If you have amassed debt for your education, student loan debt is an obligation that must be paid in full, even if you file for bankruptcy. You won’t be able to include a student loan in bankruptcy unless you are able to demonstrate that paying back that debt would cause you undue hardship. Student loan debt is treated differently in courts and they apply different tests to determine whether undue hardship exists. Some courts ask debtors to show that they cannot maintain even a minimally acceptable standard of living if they have to repay the loan, that they have tried to repay the loan, and that their current situation is likely to persist for several years. Other courts examine the totality of the circumstances to decide whether repaying student loans would constitute an undue hardship.
Tax Liens
If you owe taxes and the IRS has recorded a property lien for payment of those taxes before you file for bankruptcy, the debt to the IRS will not be discharged in your bankruptcy.
Other Types of Liens
If a creditor records a lien on your property, the lien survives a bankruptcy filing. The recording of the property lien means that a bank could still foreclose on your home even if a bankruptcy technically eliminates the mortgage debt.
Child Support and Spousal Support
A child or spousal support obligation does not disappear in a bankruptcy. If the court makes an order for you to pay spousal maintenance or child support payments, be assured that you must continue to meet those obligations during and after bankruptcy.
Fines and Criminal Judgments
If you are ordered to pay a fine (for example for an unregistered vehicle) or restitution for a crime, those criminal debts survive even the soundest of bankruptcy filings.
Conduct a Bankruptcy Filing Assessment with a Bankruptcy Attorney
If you are seriously contemplating filing for bankruptcy as an option for debt relief, having a clear and firm understanding of what a bankruptcy filing can and cannot cover goes a long way. Speaking with a bankruptcy attorney will help you make the best decisions and manage your expectations about the experience.
