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Non-dischargeable debts in bankruptcy

Many people in Rockland County understand that a Chapter 7 bankruptcy proceeding can be used to discharge, that is, write off, many different kinds of debts. Many people choose Chapter 7 to rid themselves of excessive consumer debt, such as credit card debts. In choosing Chapter 7, however, a person should be aware that a chapter 7 discharge order may not apply to several kinds of debts.

The most obvious exceptions to an order for discharge are debts that were not disclosed by the debtor on the schedules filed at the beginning of the case. In order to be eligible for discharge, a debt must be disclosed on these forms.

Many people believe that alimony can be discharged in bankruptcy, but those debts are not eligible for discharge. The same rule applies to recent state, federal and local taxes. Educational loans usually are not dischargeable unless the debtor can show that repayment would cause him or his dependents undue hardship. Courts have defined "undue hardship" in many ways, but generally, a debtor can try to prove that repayment would cause undue hardship by showing that he or she does not have and will not have the financial means to repay the loan.

Less common kinds of debts that cannot be discharged are debts that result from government orders for restitution or fines, fraudulent acts by the debtor, debts created by willful or malicious acts, debts created by embezzlement or fraud, and other debts from a divorce settlement or decree if the bankruptcy debtor has greater resources than the recipient.

The issue of non-dischargeable debts should be reviewed before the bankruptcy petition is filed. If a person has too many non-dischargeable debts, an order of discharge may not provide the anticipated debt relief. A knowledgeable bankruptcy lawyer can provide helpful advice on whether specific debts can be discharged in a Chapter 7 proceeding.

Source: FindLaw, "Debts that Remain After a Chapter 7 Discharge," accessed on Nov. 27, 2017

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