Chapter 7 Bankruptcy – What debts are not dischargeable?

As you all know, filing for chapter 7 bankruptcy protection is often a fairly efficient way to get rid of onerous debt. Don’t get me wrong, there are serious ramifications associated with filing for bankruptcy; These must be properly understood and considered before filing for bankruptcy.

However, as long as you’re realistic about your debts and understand what debts can and cannot be discharged, you’ll likely get the results you’re looking for. In the end, bankruptcy almost always gives my clients the fresh start they so desperately wanted. And for me? Happy clients = happy lawyer in my book.

However, to achieve these favorable results, it is absolutely necessary to understand which debts cannot be discharged under Chapter 7 bankruptcy protection.

Criminal Fines and Associated Debts: Fee and non-fee court ordered judgments related to criminal activity cannot be discharged. This includes convictions that involve the death or personal injury of another person and that stem from your own negligence or criminal activity, including those that stem from DUI.

Student loans: This is a common point of frustration, but in 99.99% of the cases I see (disclaimer: I made that number up, but it’s in the ballpark based on my own experience) student loans cannot be discharged. The technical jargon is that they can only be canceled when the payment causes undue hardship to the debtor or his dependents.

Fraudulent debts or dishonest activity: This is basically a general category that applies to all cases of fraud or deception, but is most often seen in bankruptcy fraud cases. An example is the debtor who exhausts his remaining credit cards in the days prior to filing the petition for him. I should note that this includes attempts to pay off secured debts with unsecured and therefore dischargeable funds. This means no cash advances on credit cards to pay alimony and child support.

Alimony and child support: Speaking of alimony and child support, it is not dischargeable. This includes provisions made for future divisions of assets, including QDROs. Keep an eye out for an article in the coming weeks about filing for bankruptcy to discharge debts incurred from property settlements in a divorce proceeding.

Tax debt: This one is a bit tricky, but it generally applies to debt incurred in the last 3 years.

Any debt not declared on the petition: This is a problem. Generally, I will access your credit report and use the information provided to report your debts in the bankruptcy petition. However, not all debts appear on your credit report and not all attorneys use this method. As such, I tell you all the queries on this point. I would hate to see you come out of bankruptcy, only to find that you are still on the hook for one or more large debts.

That’s all for now, however I’ll update this list as I go. As always, bankruptcy is easier (and the results are generally much more favorable) when left to the professionals. If you are in the Phoenix area and need a qualified Arizona bankruptcy attorney, please feel free to contact me to schedule a free bankruptcy consultation.