Although most debts are dischargeable in bankruptcy, there are certain categories of debts that are not dischargeable. This just means that even if you file for bankruptcy, you will still owe on these debts. This may seem unfair, however, these exceptions were created as a policy choice to protect certain parties from having their debts discharged. It will become clearer why these debts are not discharged after reading this article. These categories can be found within the federal statute 11 U.S.C. section 523.
Please note that the list below is not exhaustive and that there are other categories of non-dischargeable debt, but which apply to very specific situations and are usually not applicable to most individuals. If you wish to determine whether any of these or other exceptions to discharge apply to you, please consult with an experienced bankruptcy attorney. Do not assume a debt is dischargeable prior to a bankruptcy filing. Always remember that bankruptcy is complex and what is not dischargeable may hinge on a small distinction.
Student loans are almost never dischargeable in a bankruptcy. The only way to discharge a student loan is by demonstrating undue hardship. This is an extremely difficult hurdle to overcome. There is currently increasing concern about the increasing student loan debt in the United States. Because of this law, there is little way out for students that default.
The vast majority of taxes owed to the federal government, a state, or a locality is not dischargeable in a bankruptcy. The only exception to this rule is income tax that meets stringent requirements. Read my article on discharging income taxes to learn more about this issue.
Domestic support obligations are not dischargeable in bankruptcy. For example, this may include spousal support/alimony and child support. If your ex-wife obtains an order from a state court requiring you to pay $500 per month to her in spousal support, this debt will never be discharged in bankruptcy.
Fines and Restitution
Fines and penalties owed to the government, except for tax penalties are not dischargeable. Restitution to victims of crimes is also not dischargeable.
A debt that was incurred as the result of personal injury or death of an individual as the result of operating a motor vehicle while intoxicated is also not dischargeable. For example, if you are sued for hurting a motorist because you were driving drunk, and a judgment is obtained against you, the judgment is not dischargeable.
Failure to List Debts
Debts may also not be discharged if you fail to list them in your bankruptcy schedules. This occurs if you fail to list the debt in time for the creditor to file a proof of claim and the creditor had no knowledge of the bankruptcy. Failure to list all of your debts is cause it deny you a discharge and is a federal crime!
Determination of Dischargeability
There are other debts that may not be dischargeable, but only if the creditor files a lawsuit against you and the bankruptcy court determines it to be non-dischargeable. This includes debts incurred by fraud, embezzlement, larceny, breach of fiduciary duty, debts arising from willful or malicious injury, and a debt arising from a marital settlement agreement or divorce.
Thus, if you file for bankruptcy and the creditor never files a lawsuit to have the debt determined as non-dischargeable, as to those categories, the debt will be discharged. However, this is not the case as to the previous categories listed above, which are automatically not dischargeable.
This article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this article does not create an attorney-client relationship between the author of this article and the user or browser.