Bankruptcy protection! What debt cannot be discharged under bankruptcy
It can be an overwhelming experience when debts surround you. There may be innumerable reasons why you got into debt in the first place, like carrying a high-interest credit balance, expensive medical costs, poor spending habits, major life events, etc.
Being under debt is always daunting, but it can be complicated when your hope of paying it back is restrained. In such stressful times, you may look for a debt relief program to help you deal with or manage the piling debts. Depending on the debts you owe and your financial capabilities to pay them back, various debt relief programs can benefit you.
However, when paying back the debts seems too challenging, you may consider filing for bankruptcy. The primary objective of filing for bankruptcy is protecting your assets, from real estate to automobiles to regular pay. This protection prevents creditors and lawsuits from foreclosures, repossessing, or garnishing these assets.
Filing for bankruptcy can minimize or discharge your debts, protect your assets, and keep collectors away. But some debts cannot be discharged under bankruptcy, and this understanding is essential to make the most fruitful decision.
What debts cannot be discharged with bankruptcy
Alimony and child support
Alimony and child support cannot be discharged by bankruptcy protection. Although, it can help you to catch up if you are behind on payments. The payment plan under Chapter 13 bankruptcy can be helpful to eliminate the debt only when you stay on track with all future payments on this debt.
Student loan debts
Student loans can be tough to be discharged even after you file for bankruptcy. You can show how overbearing it is to you or your dependents, for instance, being unable to maintain a basic standard of living. There may be a possibility that the court will discharge a part of your student loan debt if you can prove a similar burden.
If student loan debt is one of the more significant concerns, you can look for any other debt relief program to help you get rid of your debt more quickly.
Income tax
Income tax debts that are recent can not be discharged through bankruptcy. However, some income tax debts that are older can be removed under certain conditions. When you file for bankruptcy, it should be more than three years after the tax return due date, and also, it must be more than two years after filing the return.
Income tax debts cannot be discharged unless you obtain a special exemption. You can obtain a special exemption by petitioning the bankruptcy court, stating why you should get relief.
Secured debts
Under bankruptcy protection, secured debts are not treated the same as unsecured debts. They are tied to a particular property, like a vehicle or a home. In a typical scenario, if you stop making payments against your car, it is repossessed. It works the same way even after you file for bankruptcy.
Bankruptcy releases you from the obligation to pay your secured debt regularly. But it does not discharge a lien, which gives the creditor the right to seize your property if you do not pay.
Creditors can prevent some debts from being eliminated. They can seek relief from the automatic stay, which restrains them from engaging in collection activities. The discharge process may not go as well as you hope. Consult a qualified attorney when considering bankruptcy.
Closing Thoughts
You may have accumulated or acquired debts for various reasons, but not taking steps towards getting debt-free can be a mistake. When you have large debts you can’t pay back, are behind on your mortgage payments, and face foreclosure, harassment by collectors, or all of these, filing for bankruptcy may be your best option.
However, it is necessary to understand what kind of debts can and cannot be discharged when you file for protection under bankruptcy. For instance, debts like alimony and child support, student loan debts, income taxes, and secured debts are non-dischargeable debts under bankruptcy protection. On the contrary, most consumer debts, including medical and credit card debts, are dischargeable after you file for bankruptcy.
About The Author: Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a Principal Attorney.