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What is Non-Dischargeable Debt: Chapter 7 Bankruptcy

When filing for Chapter 7 Bankruptcy, the goal for most people is debt or loan forgiveness. You have accumulated a lot of debt, and due to some unforeseen reason, you are no longer able to pay your debts. There are several reasons that people become unable to pay their debts such as divorce, illness, hospital bills, accident, loss of job, or another such occurrence. When these situations occur, you find yourself falling further behind with no relief in sight.

Dischargeable Debt

As a result, you begin the process of Chapter 7 Bankruptcy. With a Chapter 7 Bankruptcy, most types of debt are dischargeable or forgiven by your creditors. For example, you can generally discharge loans for vehicles, property, and credit cards. However, there are some repercussions to these discharges. You may end up losing your vehicles instead of having the debt forgiven and getting to keep your vehicle. As a result, you may have to make other arrangements for transportation.

Non-Dischargeable Debt

However, when filing Chapter 7 Bankruptcy, there will be some types of financial obligations that you cannot discharge. The Federal Bankruptcy Code 11 U.S.C.SEC. 523 dictates these non-dischargeable debts. Why are these debts still enforced? In many instances, at some point, Congress determined for policy reasons that the greater good for these debts was more important than the greater good of discharging these debts for you. What exactly does that mean? Let’s review some examples.

Child Support

Child support is probably the most important non-dischargeable debt to address. If you owe child support, the money you owe to your child is a vital benefit to your child. It’s more important they have it than you not have to pay it. As a result, you will continue to owe your child support requirements.

Student Loans

Discharging of student loans rarely occurs. In order to discharge student loans, you must demonstrate undue hardship. Proving undue hardship, in this case, is difficult. On the other hand, there may be a way to manage your student loans during bankruptcy.

Taxes

Another debt that is non-dischargeable in most cases is taxes; whether local, state, or federal, you will still be required to pay your tax responsibility. There are rare exceptions to this rule. For example, if the tax you still owe is over three years old and you had set up payment options for the taxes, you may be able to discharge this type of taxes. However, you must meet stringent requirements.

Fines and Restitution

Fines and restitution are of course difficult to repay sometimes. While it seems as though these might fall under the category of dischargeable debt, that is not the case. If you owe money for fines and penalties, you are not going to get those discharged. Likewise, restitution for crimes, are not dischargeable.

Personal Injury

The last debt that is non-dischargeable is personal injury. As the result of neglect or a willful act, you will not be able to get out of paying for personal injury compensation. If you committed an act that ended up injuring another person and you went to court over it, you must pay for the personal injury compensation as directed by the Judge.

In Conclusion

If you are filing Chapter 7 Bankruptcy, you must be aware of non-dischargeable debt. Some debts will still be your responsibility, even if you sign on the dotted line. If you need expert advice to guide you through the process of filing for Chapter 7 Bankruptcy, contact us at the Law Offices of John L. Schettino. We are an experienced law firm. Contact us today.