The primary appeal of a Chapter 7 bankruptcy is that it allows for most unsecured debts to be discharged entirely. However, there are certain types of debts, aside from rare exceptions, that cannot be discharged through Chapter 7, Chapter 13, or any other type of bankruptcy.
Understanding the differences between dischargeable and non-dischargeable debt in Salt Lake City bankruptcy can be crucial to going through this process efficiently and achieving a beneficial outcome. A qualified bankruptcy attorney will help differentiate between the various kinds of debt and ensure your bankruptcy petition is as productive and protective of your future financial health as possible.
11 U.S. Code §523 sets out numerous specific types of debts that are not eligible for discharge through any kind of bankruptcy proceeding, regardless of how much or how little a petitioner has in personal assets and income after the proceedings conclude. Perhaps most importantly, any debts that stem from a court order obligating support to a spouse or child are not dischargeable in Salt Lake City bankruptcy, meaning that a debtor cannot use bankruptcy to avoid paying alimony or child support.
In addition, any debts a person owes due to a ruling by a civil, criminal, or traffic court are generally considered non-dischargeable if those debts involved fraud or intentionally harmful conduct. Also, income tax debts less than three years old and any other tax debt owed to the federal or state government are not discharged in bankruptcy. Student loan debts are also almost always non-dischargeable, unless the debtor can prove that being forced to repay those loans would leave them unable to maintain a basic standard of living for an extended period of time.
Finally, suppose a person filing for bankruptcy fails to include a particular debt in their initial petition. In that case, the debt is not discharged unless the petitioner adds it to the filed schedules. However, in certain circumstances, a discharged debtor need only notify a forgotten creditor that they filed the bankruptcy after they incurred the debt.
Even if a debt is not explicitly declared non-dischargeable under the federal statute, that does not necessarily mean it will be dischargeable in every Salt Lake City bankruptcy case. If a creditor files a petition challenging a debtor’s attempt to discharge them under Chapter 7, a court can declare any of the following types of debt to be non-dischargeable:
A qualified lawyer can offer further clarification about when these debts may or may not be dischargeable through Chapter 7 bankruptcy.
While Chapter 7 bankruptcy is often an effective way to get out from under suffocating financial obligations, it does not universally wipe the slate clean for those who file for it. Beyond losing property used to secure certain debts, Chapter 7 bankruptcy petitioners may also be unable to discharge certain debts under any circumstances, even after wiping out their non-exempt personal assets.
Working with a seasoned lawyer can make it easier for you to manage dischargeable and non-dischargeable debt in your Salt Lake City bankruptcy. To schedule an initial consultation, call today.