If you are considering filing for chapter 7 bankruptcy in the hopes of making a fresh start, your decision should take into consideration that not every type of debt can be forgiven with your filing. While nearly all debts may be forgiven, or discharged, with your chapter 7 bankruptcy filing, some of the exceptions below can constitute a major proportion of your debt. Because of this, it's important to have an accurate picture of how much debt will remain after your bankruptcy before making this life-changing decision. For more information about the debts that you cannot include in your chapter 7 bankruptcy filing, read below.
You may not discharge these tax debts with chapter 7 bankruptcy:
- Any income taxes owed within the past 3 years.
- Taxes for payrolls.
- Property liens (if placed prior to bankruptcy filing).
- Fines and penalties for tax fraud and any taxes due on a fraudulent return.
2. Student Loans
For the most part, all student loans, whether backed by the government or from a private lender, cannot be included in your filing. However, if you can prove that the inability to discharge the student loan debt would cause you undue hardship, you may be able to include that debt. To prove a hardship you must meet all 3 of these requirements:
- You have made a good-faith effort to make your loan payments in the past.
- You would be unable to maintain your current standard of living.
- You will be left with a considerable financial burden even after the bankruptcy's debt discharge, and that burden is expected to last throughout the student loan's repayment period.
3. Child Support
You must still pay your child support obligation. Child support enforcement attempts to collect back-support, including property liens and wage garnishments, are not affected by your bankruptcy filing. As a side note, alimony, or spousal support, is also unaffected by bankruptcy unless you can show that paying the spousal support would cause an undue hardship upon you. The bankruptcy trustee will, of course, also take into consideration the hardship placed on your ex-spouse if this occurs.
4. Lawsuits and Legal Obligations
If you have been ordered by a court to pay any monies, including court fees as a result of a legal action, you cannot discharge this financial obligation with bankruptcy.
5. Forgotten Debts
Take special care when listing your debts for bankruptcy; any debt left off will be excluded from discharge. A copy of your credit report should assist you in creating a complete list of debts owed.
While most debt, such as credit card debt and personal loans, may be discharged in bankruptcy, it pays to have clear understanding of the debt that is excluded from bankruptcy. Talk with a bankruptcy attorney, like Legal Clinic Of Jerry Paeth, for more precise information about debt that cannot be included in your chapter 7 bankruptcy filing.