When considering bankruptcy, you may assume all of your debts will get discharged, but this may not be the case. Of course the best way to understand what of your debt is eligible for discharge is to contact a New Haven bankruptcy attorney, however, to assist you as you learn more about the process, we have compiled a list of the five most common types of debt that are not discharged through bankruptcy.
Child support and spousal support.
If you find yourself in a position where you owe money in either child support or spousal support, chances are bankruptcy will not alleviate those debts. Furthermore, you will likely have to continue paying support throughout the bankruptcy process. While past debts cannot be cleared, it is possible to get your payments lowered if you qualify. In order to qualify, you must prove a change in circumstances, such as a lost job or reduced wages. It’s a good idea to prioritize these payments, since failure to pay can lead to garnished wages, a suspended driver’s license or even jail sentence. It is best to talk through child support or spousal support disputes with a third party present, such as in family therapy.
Most people who have pursued any kind of higher education have held some student loans, and some people have quite substantial loans. Unfortunately, these loans are typically not discharged in bankruptcy. The exception is rare and requires you to file a separate action, an “adversary proceeding.” The burden of proof is quite high. You would have to prove that repaying the loans would cause undue hardship and would be unable to maintain a modest standard of living. Additionally, you would have to show a good faith effort to repay the loans prior to the bankruptcy proceedings.
Personal injury or wrongful death payments.
If you find yourself in the situation of having court-directed repayments because of personal injuries or wrongful death, these debts will be carried over, even after filing for bankruptcy. However, depending on the type of bankruptcy you file for, it could help to establish a payment plan.
This one is actually quite complicated because there are exceptions, but as a general rule, unpaid taxes are not forgiven even if you file for bankruptcy. More specifically, there are instances where income tax can be discharged if the debt is more than three years old, you filed a tax return, and you did not intentionally avoid paying the tax. This only applies to income tax, though. Other taxes cannot be eliminated through bankruptcy.
Debts not listed in the case.
Chances are, if you are considering filing bankruptcy, you owe money to many different creditors. While it might be time consuming, it is critical that you make a detailed list of all the debts you owe and to whom, even if there is a slim chance that they will be discharged (like any of the debts on this list). The reason is because debts cannot be discharged that are not listed on the filing, so it is important to have a comprehensive list when you file.
If you are feeling overwhelmed by the bankruptcy process and have more questions about which debt can be discharged, you might benefit from a consultation with a bankruptcy lawyer. The Law Offices of Ronald I. Chorches offer free consultations and will be able to answer questions you have about which debt can be expunged.