When considering filing for bankruptcy, it is important for a debtor to understand the types of debt that he or she may have. The type of debt will determine whether bankruptcy can discharge it. If you are considering filing for bankruptcy and would like to learn what debts the bankruptcy will discharge, a Morris County bankruptcy lawyer can advise you of your options.
Debts Dischargeable During Bankruptcy
- Credit card debt
- Unpaid leases
- Personal loans – as long as you did not use the loans to pay off non-dischargeable debt.
- Unpaid car debt after your creditor has repossessed the vehicle
- Car accident-related judgments against you
- Older unpaid taxes – those taxes older than three years.
- Court judgments against you – but, see below, as bankruptcy cannot discharge personal injury judgments against you while you were intoxicated.
- Medical bills
- Business expense debts
Debts Not Dischargeable During Bankruptcy
- Student loan debt – a bankruptcy can discharge student loan debt, but it is rare and difficult to do so. The debtor must show undue hardship, which usually requires a physical inability to work and no chance of making money.
- More recent taxes – those taxes that were due within the past three years.
- Child support
- Spousal support (alimony)
- Judgments in personal injury lawsuits against you if you were intoxicated
- Anything you fail to include in your bankruptcy filing – you must file a bankruptcy schedule that lists your debts and creditors. You cannot discharge debt that you fail to include on your schedule.
- When fraud is involved – even for debts that a bankruptcy can discharge like credit card debt, for instance, if your creditor challenges your bankruptcy, alleging that your credit card use was fraudulent, the bankruptcy court may choose not to discharge the fraudulently incurred debt.
- When you took on debt in bad faith – people frequently get into trouble when they make expensive purchases on credit relatively close to the time that they file for bankruptcy. A bankruptcy will not discharge this type of debt. The general timeline is debt taken on within 60-90 days of the bankruptcy filing.
- Fines or penalties to government agencies
- Anytime a crime or willful injury is involved – bankruptcy cannot discharge any court-ordered fees related to criminal activity or international harming.
- Dischargeable debt used to pay off non-dischargeable debt – the bankruptcy court will treat the dischargeable debt as non-dischargeable.
- Marital debts – debts incurred during a divorce or separation from your spouse.
For the most part, the types of debt that a bankruptcy can discharge or not discharge are similar under either a Chapter 7 liquidation bankruptcy or a Chapter 13 reorganization bankruptcy. A Chapter 13 bankruptcy, however, may allow you to keep secured property if it is feasible for you to repay your debts in 3-5 years. Contact a Morris County bankruptcy attorney at Ast & Schmidt, PC to learn more about discharging debts with a Chapter 7 or Chapter 13 bankruptcy.