There are many myths and misconceptions surrounding the bankruptcy process and what happens to people's financial situations after they file for bankruptcy. It is important for people considering bankruptcy to understand what a discharge of debts is in bankruptcy and the types of debts a person may discharge through bankruptcy in order to make informed decisions about their finances.
What Is Debt Discharge?
When a judge enters a debt discharge order at the end of the bankruptcy process, the debtor no longer has to repay the discharged debt. Once a debt has been discharged, creditors may not enforce the debt by obtaining a judgment against the debtor, and creditors cannot communicate with the debtor about the debt in any way - the debt essentially has been eliminated.
What Debts May a Person Discharge in Bankruptcy?
Importantly, debt discharge is only possible for debt not backed by collateral such as a house or a vehicle, unless a judge makes the lien on the collateral unenforceable. In addition, the U.S. Bankruptcy Code specifically excludes certain types of debts from discharge, depending on the bankruptcy chapter under which the individual filed.
For instance, under Chapter 7 bankruptcy, 19 types of debt are excluded from discharge. Some of the more common debts that cannot be discharged in Chapter 7 bankruptcy are:
- Child support
- Alimony (spousal support)
- Student loans
- Some tax debt
- Government fines
- Fines for injury caused by drunk driving
- Debts resulting from intentional property damage
- Debts the debtor did not include on the bankruptcy petition
Chapter 13 bankruptcy is less restrictive concerning the types of debts that may be discharged. Debts that may be discharged under Chapter 13 but not Chapter 7 include:
- Property-settlement debt from divorce or separation proceedings
- Debts resulting from intentional property damage
- Debts incurred to pay otherwise non-dischargeable tax obligations
An Attorney Can Help
If you are considering filing for bankruptcy and would like to know whether your debts can be discharged in the process, contact a knowledgeable bankruptcy lawyer to discuss your situation and the legal options available to you.
