What are : Nondischargeable debts
Bad news: Not all debt is dischargeable in bankruptcy. It pays to know which debts you can and which you can’t discharge. What those non dischargeable debts are depends partly on which Chapter bankruptcy you file under: either Chapter 7 or Chapter 13. If your creditors are sloppy (i.e. he/she/they don’t bother to file a claim in your Ch. 13 case) you might just discharge some otherwise nondischargeable debts like a student loan or a debt owed to an ex-spouse. But I don’t recommend counting on either luck or sloppy opposition. Know what you’re up against. Is the debt “secured” (like a home mortgage or auto loan) or unsecured, like most credit card debt? Secured creditors are typically entitled to get one of two things: payment or the return of their collateral. So they aren’t as worried about dischargeability as the unsecured (think credit card debt) creditors. Secured creditors usually get paid in full no matter whether yours is a Chapter 7 or 13 if you decide to keep the collateral (i.e. the house, the car). There are some exceptions, like a “cram down” for an undersecured car in a Ch. 13. Chapter 7 bankruptcy can provide relief from credit card debt and medical bills so that you have enough money to pay your other bills. A debtor may “reaffirm” some debt and not others. However, in a Chapter 13, you may not discriminate between one unsecured creditor and another.
The power of bankruptcy to discharge debt is broad but not unlimited.
- Eliminate certain rights of secured creditors. Some examples of secured debts are car loans and home mortgages. You can force secured creditors to take payments over time, but generally, you cannot keep the collateral unless you continue to pay the debt owed against the asset.
- Discharge debts that arise after the bankruptcy has been filed.
- Discharge certain types of debts, such as child support, alimony (spousal maintenance), certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and most taxes.
- Eliminate the obligation of a co-signer on your loan in most cases.
Some unsecured debts get treated with “priority.” These might include taxes, whether payroll, income or other taxes, student loans, child support, spousal support and support arrears. This is not a complete list. Not all unsecured priority debts are created equal, however. Some are simply not dischargeable at all, such as child and spousal support. Others get priority among the unsecured creditors, depending on whether yours is a Chapter 7 or 13. Consult my office to learn what may be critical distinctions in your individual case.
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