Some Debts Cannot Be Discharged Through Bankruptcy

A bankruptcy discharge refers to the finalization of a bankruptcy proceeding, whereby the debtor is released from their debts and absolved of liability for those debts. Debts that are considered dischargeable are most credit card debt, medical debt, judgments, business debts, mortgage debt and auto debt. Although mortgage loan and auto loan debts are dischargeable, the property will be repossessed by the lender. Non-dischargeable debts are unable to be eliminated through bankruptcy and the debtor is held liable for their payment. There are many types of debts that cannot be discharged through bankruptcy, and how the debtor repays the debts varies by the type of bankruptcy filing.

Types of non-dischargeable debts:

Child/Spousal support payments – Bankruptcy laws prohibits child support or alimony payments from being discharged by filing a bankruptcy. Owed payments that accrue before, on or after a bankruptcy filing are legally recoverable by the spouse, former spouse or child.

Taxes – Federal, state and  local taxes are not allowed to be eliminated through a bankruptcy unless (a) the owed taxes are more than three years old, (b) tax returns for the previous years were filed on time and (c) the tax returns were correct when filed. Any credit card debt accrued by being used to pay for owed taxes is not dischargeable through bankruptcy.

Student loans – Student loan debt, whether government backed or privately funded loan, is not dischargeable through bankruptcy. If the payments would impose an undue hardship on the debtor the bankruptcy court may allow some or all of a student loan debt to be discharged.

Fines resulting from criminal or negligent action – Any fines accrued as the result of criminal, fraudulent or negligent actions are prohibited from being eliminated in bankruptcy. Criminal actions, such as traffic ticket fines or criminal restitution payments cannot be discharged. Fraudulent actions such as providing incorrect information or withholding information on a bankruptcy petition will result in the debtor being held liable for such debts. Debtors are also held liable for debts obtained through negligence causing injury to another person.

Recent Credit Purchases or Cash Advances – Bankruptcy laws prohibit any recent credit purchases or cash advances from being discharged through bankruptcy. A credit purchase or cash advance debt will be considered non-dischargeable if (a) it exceeds $1,150, and (b) was accrued within 60 after filing bankruptcy.