Curious as to whether all of your debts will really be forgotten if you file for bankruptcy? To answer that question, Catherine Christiansen steps in to tell us which debts will and won’t disappear during a Chapter 7 or 13 filing. A graduate of Western State University, Christiansen is a bankruptcy expert in practice at the Christiansen Law Office in Long Beach, California.
Absolutely, people should understand that just because they file for bankruptcy does not necessarily mean every single one of their debts will go away. Certain debts are treated differently by the court, depending on who they are owed to and whether they are secured or unsecured debts.
For people who are not clear, a secured debt is when money is owed for a particular property, such as a home or a car. Unsecured debts, meanwhile, are owed for things that cannot necessarily be taken back, like credit card debt or student loan debt that occurred during someone’s college education.
If someone fails to pay back his student loans, the court can’t just come and take that knowledge away, so that is why student loans are considered a form of unsecured debt. In that same vein, though, people should understand that student loans also happen to be a type of debt that does not just disappear because someone files for bankruptcy. Only in the most extreme of hardship case — —such as if a person has suffered a disability that makes it impossible for them to work — will a court absolve them of that type of debt. That is why people should never take out student loans assuming they will not have to pay them back.
Other types of debt that fall into that same category including income tax debt or employer tax debt on the trust, which is when an employer withholds taxes. That type of withholding tax debt is never dischargeable by a bankruptcy court. Another type of debt that is not dischargeable is child support or spousal support. Those payments will not be erased by the court when a person is filing for bankruptcy.
The court won’t absolve payment owed for services that have been obtained fraudulently, either. So if someone obtains a specific service or even a property of some type using fraudulent means, then that creditor can and oftentimes will file a complaint in the bankruptcy court to have that debt declared non-dischargeable. When a debt is declared non-dischargeable, that essentially means that the creditor has said, and the judge agrees, that fraud was involved in that debt in some way. What is included in this? That would be things like cash advances, for one. If a debtor gets cash advances from a credit card within 90 days of filing for bankruptcy, then the money from those cash advances is not going to be forgiven. The debtor will have to pay all of that cash back.
On a similar note, the same school of thought applies to luxury items. If a debtor obtained luxury items within 70 days of filing for bankruptcy, then the cost of those items may also be found to be non-dischargeable by the court. And in those cases, the person filing for bankruptcy will have to pay for those items, even if he goes through with filing for bankruptcy.
Finally, government fines as a rule are never absolved through bankruptcy. Government fines include the fines people may get for driving under the influence. Those types of things will not be found to be dischargeable by the court, and the debtor will have to pay those off in the end.
While filing for bankruptcy can help eliminate much of your debt, it will not necessarily get rid of everything. For the best advice on what will and will not be absolved during a bankruptcy filing, it is best to speak with an attorney who understands the details of your specific case.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
