What new debts can't be discharged in bankruptcy?
Not all debts are automatically dischargeable in a bankruptcy. Bankruptcy may cancel some of your debts, but it probably won’t cancel all of them. This means, before you make the decision to file Chapter 7, Chapter 13 or any other type of bankruptcy, it is important to understand what bankruptcy means, what you will be responsible for paying after your bankruptcy is final, and exactly what will be “wiped out.”
Common Non-Dischargeable Debts
There are a number of debts that you may think are dischargeable, but are not. For example, all domestic support obligations are non-dischargeable regardless of whether they are for alimony, support or a property settlement. Privately funded student loans are now treated the same way as loans guaranteed by a governmental agency and loans made or funded by a governmental agency or nonprofit institution. These loans are non-dischargeable, except upon a showing of undue hardship.
Non-Dischargeable Debts: Taxes, Fines, and Retirement Plans
A debt incurred to pay a non-dischargeable tax to any governmental unit, and not just the U.S. government as under prior law, is no longer dischargeable. This change will primarily affect debtors who have paid taxes with a credit card. Additionally, debts to pay fines or penalties imposed under federal election laws are non-dischargeable. Debts to qualified retirement plans are also non-dischargeable.
Non-Dischargeable Debts: Fraud and Personal Injury Claims
The so-called “super discharge” in Chapter 13 is not nearly so broad as it was under prior law. It is no longer possible to discharge taxes for which required returns were not filed or for which fraudulent returns were filed, or debts incurred by fraud or defalcation. While it is still theoretically possible in Chapter 13 to discharge debts for willful and malicious injury to person or property, a debt involving willful or malicious injury causing personal injury or death to an individual cannot be discharged.
Just as was true under prior law, certain credit card transactions, on the eve of bankruptcy, are presumed fraudulent and therefore, non-dischargeable. However, the debtor can continue to rebut the presumption. The transactions affected are luxury goods and services totaling more than $650 within 90 days of your bankruptcy filing and cash advances of $925 or more received within 70 days. These limits are adjusted every three years for CPI: the next inflation adjusted numbers will occur on April 1, 2016.
Other Non-Dischargeable Debts
If you forget to list a creditor in a Chapter 13 filing and thereby fail to provide that creditor notice of the bankruptcy, then that debt may not be discharged in bankruptcy. The result could be the same in a Chapter 7 filing where assets were distributed based on the list of creditors you provided to the bankruptcy court.
Getting Bankruptcy Help
If you're confused about current bankruptcy laws and need help interpreting them or filing a bankruptcy claim, consider hiring a bankruptcy lawyer. A bankruptcy lawyer can explain what bankruptcy means, make recommendations, and provide referrals for credit counseling services if you decide bankruptcy is not for you.