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Will bankruptcy wipe out my debts? Some debts are not dischargeable.

Posted on Jun 3, 2009 in Uncategorized

The main reason to file a bankruptcy case is to discharge, eliminate and wipe out debt.  And of course, as we have explained in previous posts, in bankruptcy, an honest debtor can get a fresh start through the discharge in bankruptcy.

However, in bankruptcy, some debts are not dischargeable.  The reason for this can be found in Section 523(a) of the Bankruptcy Code.

Some debts are never discharged in bankruptcy.  A creditor doesn’t have to do anything  for these debts to remain valid after bankruptcy.  Here are some examples of non-dischargeable debt:

  • Certain types of taxes and particularly taxes where the debtor filed a fraudulent return tried to evade or defeat the tax and particularly income taxes less than 3 years old.
  • Debts which the debtor did not list in his bankruptcy papers in a case where the creditor might otherwise have recovered a dividend – commonly referred to as an asset case
  • Debts for a domestic support obligation – arising from a divorce or other family law sort of situation
  • Other debts, such as property settlements – arising from a divorce or other family law sort of situation
  • Most fines, penalties or forefeitures payable to a governmental unit
  • Student loans except in extraordinary cases
  • Personal injury claims arising from use of alcohol or drugs
  • Criminal restitution
  • Condominium or homeowner association assessments due after the debtor files his bankruptcy case.  For more information about post-petition liability to homeowners or condo associations, click here.

In addition to these problems, a debtor could be sued in a complaint to determine dischargeability of debt during the course of a bankruptcy case.  Debts for these types of claims are discharged in bankruptcy unless the creditor timely files and thereafter wins a lawsuit during the course of the debtor’s bankruptcy case.  The normal attorneys’ fee for the bankruptcy case will most certainly not cover the cost of defense.  A creditor can file a lawsuit to force the debtor to pay these kind of debts:

  • debts procured by fraud or false pretense
  • debts procured by a false financial statement
  • debt for luxury goods or services obtained within 90 days of a bankruptcy are presumed to habe been obtained by fraud or false pretense
  • cash advances for more than $750 within 70 days of a bankruptcy case are presumed to have been obtained without the intent to repay.
  • debts procured by breach of trust
  • debts arising from a willful or malicious injury to another or their property.  In this situation, the debtor must have had the actual intent to harm.  Mere negligence or even recklessness is not enough to make a debt non-dischargeable.

You should discuss any of these situations with your bankruptcy attorney.  Some of these debts might be dischargeable in chapter 11 or chapter 13.  Other remedies might be possible to help you address the problems you face from otherwise non-dischargeable debt.

Lakelaw represents people in bankruptcy.  Not only do we defend people against claims that their debts are not dischargeable, we also pursue claims asserting that debts might be nondischargeable.  

For help with potentially nondischargeable debt, call Lakelaw now at 1 866 LAKELAW (1-866-525-5359).


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