What are Non-Dischargeable Debts in a Bankruptcy Filing?

Non-dischargeable debts are debts that can’t be eliminated in a bankruptcy because the U.S. Bankruptcy Code doesn’t allow it. Some non-dischargeable debts are given this special status because the type of debt is such that there is a public policy interest in not allowing filers to eliminate it. An example of this is child support. 

Other debts are non-dischargeable because of the way they were incurred, such as criminal restitution. Most unsecured debts that folks are struggling with today, things like medical bills, credit card debt, personal loans, and old utility bills are eliminated when the bankruptcy dischargeis entered.

If you’re struggling each month to make ends meet, or have to worry about whether you should pay rent or the credit card company, bankruptcy can help you get the relief you need. To help you determine whether you should file bankruptcy, his article explores what types of debt can’t be discharged pursuant to the U.S. Bankruptcy Code. 

Alimony and Child Support are Non-Dischargeable Debts in Bankruptcy

Domestic support obligations, like alimony and child support are always considered non-dischargeable debts in bankruptcy. You can't get rid of past due domestic support payments by filing a bankruptcy case. This is one of those public policy interest exceptions. Additionally, since domestic support obligations are one of the few exceptions to the automatic stay, family court actions for the establishment or modification of domestic support obligations are allowed to continue even after a bankruptcy case is filed. If your wages are being garnished for current or past due child support obligation, the bankruptcy filing will not stop the wage garnishment.

While you can't get a discharge of your past due domestic support obligation, if you're behind on monthly payments for child support or alimony, you can file a Chapter 13 bankruptcy to get current. As long as you remain current on all future payments for these non-dischargeable debts, you'll have eliminated this debt by paying it off through a Chapter 13 payment plan.

Student Loans are Non-Dischargeable Debts in Bankruptcy (A lot of the Time)

Most people know that student loan debt can't be discharged in bankruptcy. This is true in Chapter 7 and Chapter 13 cases. However, there are some cases where a filer is able to get a bankruptcy discharge for all or part of their student loans. Requirements for such a discharge are very hard to meet. You must prove that paying the student loans will create an undue hardship that prevents you from meeting your basic needs. You must also prove that your current financial situation is expected to continue indefinitely. If you can prove these two requirements, you must also prove you made a good faith effort to repay the non-dischargeable debts. Since many people are behind on their monthly payments when they file for Chapter 7 relief, they are often unable to prove all required elements to get rid of student loans in a bankruptcy case.

Most Income Taxes are Non-Dischargeable Debts in Bankruptcy

Recent income tax debts can't be eliminated with a bankruptcy filing. As with domestic support obligations, you can use a Chapter 13 repayment plan to pay off your non-dischargeable income tax debts. However, as with student loans, back taxes survive a Chapter 7 bankruptcy filing. Some older income tax debts can be eliminated even in a Chapter 7 bankruptcy, but only if certain requirements are met. 

The bankruptcy has to be filed more than 3 years after the tax return was due and more than two years after the return was filed. Any taxes assessed in the 240 days before the bankruptcy filing can't be discharged even if the other requirements are met. Additionally, if the IRS can prove fraud or tax evasion on your part, the tax debt remains non-dischargeable no matter how old the debt is.

If you have significant tax debts, consider getting professional help by speaking to a lawyer about your bankruptcy options. This will help you ensure you choose the type of bankruptcy most suited to your needs.

Secured Debts are Sometimes Non-Dischargeable

Secured debts are treated differently because they're connected to a specific piece of property, such as a car loan or a home, in the case of a mortgage. Outside the context of bankruptcy, if you stop making your car payment, your car is repossessed. So, you can't stop making your payments and keep the car anyway just because you filed a Chapter 7 bankruptcy. In other words, filing bankruptcy is not a way to get to a free car. Since this is a topic that comes up frequently, check out thisdetailed guide on how this works for cars.

Other Non-Dischargeable Debts in Bankruptcy

There are a few other categories of non-dischargeable debts in a Chapter 7 case. Many of these non-dischargeable debts are rare and do not apply in most Chapter 7 cases. Examples of other non-dischargeable debts in a Chapter 7 bankruptcy case include:

• 401k loans

• Other government debt such as fines and penalties

• Restitution for criminal acts

• Debt arising from fraud or false pretenses

• Debts you intentionally did not include in your bankruptcy forms

• Damages related to a DUI accident

Why Should I File Bankruptcy if I Owe Non-Dischargeable Debts?

Even though you might owe a few non-dischargeable debts, this does not mean that bankruptcy can’t help. Many filers who have non-dischargeable debts find that it’s much easier to pay these debts after getting rid of their other unsecured debts. 

For instance, if you owe student loans or income taxes, you might be able to reach an agreement with these creditors for an affordable payment plan after bankruptcy. Without worrying about paying credit card debts, medical bills, and personal loans, you may have the disposable income to pay the non-dischargeable debts.

Furthermore, ignoring all your debts because you have non-dischargeable debts is not prudent. Your unsecured creditors may or request to collect unsecured, dischargeable debts.

You can prevent collection actions including wage garnishment and debt collection lawsuits, by filing for debt relief under Chapter 7. You might have one or two non-dischargeable debts that you must deal with after receiving your Chapter 7 discharge, but at least you won’t need to worry about the thousands of dollars in dischargeable debts you were able to get rid of in your Chapter 7 filing .

Are You Ready to Get Rid of Your Unsecured Debts?

If you are unsure whether you have any non-dischargeable debts, we can help. As you go through the process of preparing your bankruptcy forms, we guide you through determining whether your debts are secured, unsecured, or priority debts and flag non-dischargeable debts.

We do not expect you to understand bankruptcy law because you are not a bankruptcy attorney. Therefore, we have developed a process that helps you determine the right category for each one of your debts. You complete the bankruptcy forms, but you have someone to turn to if you have questions.

Even if you do not have the money to pay for professional help from a bankruptcy lawyer, you can still receive debt relief from the bankruptcy court and, if you’re eligible, we can help! Upsolve is a non-profit organization dedicated to helping low-income individuals in financial distress get a fresh start through Chapter 7 bankruptcy. Our services are provided to qualified individuals at no cost.

If you still are not convinced, see what past users got their fresh start through Upsolve have to say about it. Together, we were able to help them eliminate their debts while protecting their property and income. They are now on the road to a brighter financial future.

They got a fresh start to recover and rebuild after a financial crisis. You deserve the same chance. Start your journey on the road to financial well-being today by contacting our office to begin your journey toward lasting debt relief.