There’s a misconception that filing for bankruptcy will wipe your slate clean, leaving you with no debt and a new start. Bankruptcy does provide a pathway to a new beginning financially, but it’s likely that you’ll still carry some debt after your case – albeit a much more manageable number than before.
Chapter 7 and Chapter 13 bankruptcy both have certain untouchable debts. These debts are often protected by law or through “secured” debt that is required to be paid back no matter the circumstances. You should have a better understanding of these nondischargeable debts so you don’t waste your time and your credit on a filing that doesn’t get you where you need to be.
Student Loan Debt
Student loan debt is among the most controversial debts Americans have, to the tune of $1.6 TRILLION across the country. This massive burden has reduced spending capabilities, but bankruptcy won’t help most people get out from under student loan debts.
Student loan debt was no longer dischargeable through bankruptcy as of 1976 when an extension of the Higher Education Act became law. Legislation in the decades to follow tightened the restriction on student loan debt dischargeability in bankruptcy.
The only avenue to get your student loan debt discharged in either Chapter 7 or Chapter 13 bankruptcy is to prove “undue hardship.” In extremely rare cases, the court will allow you to discharge some or all of the debt if you are unable to maintain a basic standard of living due to the burden of paying your student loan payments.
Alimony and Child Support
When the courts dictate that there’s a financial need present for your children or your former spouse, the debt can’t be wiped out through bankruptcy. The need remains, thusly requiring you to continue assisting in that need.
However, you can pursue a decrease or elimination of child or spousal support payments through the proper court that has jurisdiction over these payments. These rules apply to several other court-ordered debts, as well.
Intentional Injury Judgments
If you have a previous judgment against you for injuries you inflicted on another person intentionally or maliciously then you’re going to retain that debt after bankruptcy. The court system has already ruled that you owe a financial debt due to the burden your actions caused, and another court isn’t going to overrule that decision because of the financial hardship you’re facing.
You will be expected to pay this debt but filing bankruptcy will help you to fulfill your obligation with the lessened financial responsibility that results from your bankruptcy.
Recently-Imposed Taxes
Your tax debt can be wiped out through bankruptcy. Tax debt can pile up quickly and the IRS may come for your assets and even garnish your wages when you get behind on payments. Bankruptcy can alleviate that pressure from the IRS, but you won’t be able to get it all forgiven. Generally, tax debts imposed by the state or federal government within the last three years won’t be forgiven through bankruptcy.
There are several other debts that may not be forgiven depending on your situation, including any “recent” credit card debt (this prevents people from splurging in the days and months leading up to their bankruptcy case). Before you file for bankruptcy, make sure your debt can actually be forgiven and that your case will be worth it. At Velazquez Consumer Law, LLC we shield clients from surprises so they don’t waste their time pursuing bankruptcy that won’t actually help them. Contact our team and get a full overview of your financial situation before you file.
Velazquez Consumer Law
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