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Can I discharge all of my debts through personal bankruptcy?

When people in Rockland County consider bankruptcy, they want to reduce their debts by the greatest amount possible. A natural question is whether all debts can be discharged in either a Chapter 7 or a Chapter 13 consumer bankruptcy proceeding. The unhappy answer is "No."

A Chapter 13 bankruptcy requires the debtor to prepare a plan of reorganization that will result in paying creditors at least some portion of the debt. By its nature, Chapter 13 bankruptcy does not contemplate the discharge of all debts.

In a Chapter 7 bankruptcy, the debtor can discharge many debts, but several kinds of debts are specifically excluded from the order of discharge. These include obligations not listed on the schedule of debts filed with the petition, most student loans, state, federal and local taxes, court fees, child support and spousal maintenance. Other types of debt are also excluded, but these debts are far less common than the ones just listed: government-imposed restitution, fines and penalties, debts resulting from personal injury damages caused by driving while intoxicated, debts owed to certain pension plans and certain debts owed for condominium dues and fees.

A special class of debts is also non-dischargeable. If the debt was created due to the debtor's fraud or other illegal act, the resulting debt cannot be discharged. These debts include debts created by fraud, willful and malicious acts and debts arising out of embezzlement, larceny or breach of fiduciary duty. The creditor must specifically object to the discharge of a debt in this category and must prove that the debt satisfies the statutory criteria for non-dischargeability.

Anyone contemplating bankruptcy who owes money falling into one or more of the categories noted above may wish to consult an experienced bankruptcy lawyer for advice on whether bankruptcy would be worthwhile.

Source: FindLaw, "Debts that Remain After a Chapter 7 Discharge," accessed on March 5, 2018

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