Many people are confused about the debts they can discharge or get rid of in bankruptcy.
To establish if you can discharge a certain debt, you need consult with an experienced bankruptcy attorney.
This is owing to The Bankruptcy Code’s lengthy and convoluted list of statutory discharge exceptions.
Over time, Congress has decided that certain debts should not be dischargeable. In some cases, the party due the debt (the “Creditor”) is obliged to formally protest to the discharge by a specific time deadline. If they do not object in a timely manner, the obligation is discharged.
Others are only dischargeable if specific criteria are not met. Some of these are taxes.
To make matters even more complicated, some debts are dischargeable under Chapter 13 bankruptcy but not under Chapter 7 or Chapter 11. These include government debts such as fines and penalties. Also included are non-support debts payable to a spouse as a result of a divorce, such as marital equalization payments.
To be clear, a debt discharge in bankruptcy does not “delete” or “eliminate” the obligation. The discharge is a federal court decree that bans the creditor from initiating any further debt collection activity. Violation of this injunction may result in heavy fines for contempt of court.
The simplest way to look at it, in my opinion, is to assume that all obligations are dischargeable in bankruptcy except those that are not.
The following is a list of some of the debts that cannot be discharged in bankruptcy in Dix Hills, New York and elsewhere.
Debts Accrued Through Fraud – This category includes scenarios such as racking up credit card debts with no intention of repaying them. This requires the creditor to file an objection to discharge in a timely manner and to substantiate the fraud elements.
Income Tax Debts for which returns were required to be filed less than 3 years before filing the bankruptcy case, assessed fewer than 240 days before filing the bankruptcy case, and filed less than 2 years before filing the bankruptcy.
Domestic Support Obligations, including Alimony and Child Support
Willful and malicious harm to a person or property. This necessitates the creditor timely filing an objection to discharge before the deadline. The creditor must demonstrate that the injury was both purposeful and malicious. This implies that they intended the harm that transpired. This covers things like property destruction, copyright violation, and the obvious physical battery. This is exclusively exempt from discharge under Chapters 11 and 7.
Larceny or embezzlement. Debts incurred as a result of theft are not dischargeable. However, this requires the creditor to file an objection in the bankruptcy case on time.
Penalties, fines, or forfeitures owed to a governmental unit.
Student Loans are not available until “undue hardship” is proven in court.
Driving Under the Influence of Alcohol. Intoxication-related death or injury while operating a motor vehicle, watercraft, or aircraft.
Criminal Restitution
Non-Support Debts to Spouse. This covers things like marital equalization payments and other items owed pursuant to a divorce that are not specified as “support”. These debts are not dischargeable in Chapters 7 or 11, but they are dischargeable in Chapter 13.