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Thursday, May 19, 2022

What Cannot Be Discharged in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy can be just the opportunity you need to have a fresh financial start. If you are struggling with bills, minimum payments, and collection efforts may even be in full swing, filing for Chapter 7 bankruptcy can not only hit the pause button on collection efforts, but can also mark the beginning of a path to financial relief. Before you pursue Chapter 7 bankruptcy, however, it is important to get as many facts about the process as well as what debts can actually be discharged, or clear, as a result of the bankruptcy. After all, if the bulk of your debt is not considered dischargeable in Chapter 7 bankruptcy, filing might not be the best course of action. If you do have a significant amount of debt that would be dischargeable, on the other hand, it might be a great option for you.

What Cannot Be Discharged in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is considered to be a liquidation bankruptcy because, in it, non-exempt assets may be sold off, or “liquidated,” and used to pay off outstanding debt obligations. At the end of Chapter 7 bankruptcy, qualifying debt is discharged, or eliminated. Certain debts, however, are not dischargeable and will remain your responsibility for paying even after Chapter 7 bankruptcy is completed and other eligible debts are discharged.

Debts associated with family support are, generally, non-dischargeable. This means things such as back child support and alimony obligations will not be discharged in bankruptcy. Additionally, student loan debts is not usually dischargeable in bankruptcy unless you can prove that repayment would cause you an undue hardship. This is a difficult exception to meet. With more and more people plagued by staggering student loan debt, you should note that it is not often discharged in bankruptcy.

Income tax debts incurred within the past 3 years and other tax debts will also be non-dischargeable in bankruptcy. This means that Social Security taxes and any unpaid withholding tax for employees will not be discharged in bankruptcy. Should you be struggling with the prospect of repaying an outstanding tax debt, you should consider exploring options other than bankruptcy to resolve the problem. You may be eligible for tax repayment relief such as an Offer in Compromise or something else.

Debts incurred due to a personal injury claim are also not dischargeable in bankruptcy. Any civil or criminal fines or penalties incurred as a result of violating the law are not dischargeable. Additionally, any debts you failed to list in your bankruptcy case will not be dischargeable unless your creditor somehow is notified of your bankruptcy case.

On top of the above mentioned non-dischargeable debt, there are also debts that a bankruptcy judge is empowered to declare as non-dischargeable should a creditor challenge your request to discharge the debt. This kind of debt includes debt incurred based on fraud as well as debts resulting from embezzlement or larceny. Purchases of luxury goods or services totaling $1,150 or more within 60 days of filing bankruptcy may also be deemed non-dischargeable by the bankruptcy judge.

New Jersey Bankruptcy Attorneys

Are you considering bankruptcy? Talk to the Cassidy Law Firm to get the information you need to make the best decision for you and your family. Contact us today.

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