People who are facing mounting debts may decide that they need to file bankruptcy to regain control of their finances. Consumers typically file a Chapter 7 or a Chapter 13 bankruptcy, both of which end with a bankruptcy discharge when a case is successful.
A bankruptcy discharge can eliminate qualifying debts, but that doesn’t mean that every financial obligation is erased. A discharge order prevents creditors from attempting to collect on the discharged debts, but there are some that can’t be discharged. Understanding the difference between what debts can be discharged and which ones can’t be discharged can help people who are filing for bankruptcy protection to better understand their rights, options and legal limitations.
Common debts that may remain after bankruptcy
Domestic support obligations are among the most common debts that aren’t discharged in bankruptcy. This includes child support and alimony. Certain tax debts, including recent income taxes, tax penalties and some trust fund taxes may not be able to be discharged.
Student loans usually can’t be discharged unless the filer can prove that there is an undue hardship present, but doing so requires a separate court process. Penalties, fines and restitution that are owed to government entities will usually survive the bankruptcy process.
There are also special circumstances that surround secured debts, such as mortgages and vehicle loans. It’s sometimes possible that the filer can enter into a repayment plan, but this must be handled carefully.
Ultimately, it’s critical for anyone who’s considering a bankruptcy to understand how the entire bankruptcy process will impact them. It can beneficial to discuss your specific circumstances with a skilled legal team accordingly, so that you can learn about the options you have and how each might impact the outcome of your situation.
