7 Debts You Can’t Discharge Through Bankruptcy
By Brenner Spiller & Archer, LLP | May 4, 2021
Bankruptcy can be a proper solution to people feeling the massive weight of financial burdens. It can provide a clean slate that allows someone, with few caveats, to get a fresh start and regain power over their financial situation and life.
But while bankruptcy is extremely helpful in relieving financial stress, it’s definitely not a complete reset button. Here are seven types of debt that won’t be discharged through bankruptcy:
1) Child Support and Spousal Support
Despite the best interests, child support and spousal support payments can make a difficult financial situation worse. It’s a necessary obligation that most would like to pay, but other debts and common bills can pile up. Add to that the high fixed costs of child support and/or spousal support, and it’s a recipe for financial disaster. But while bankruptcy can help alleviate some debt, take note that child support and spousal support are not dischargeable.
2) Student Loans
Student loans aren’t generally discharged in bankruptcy, especially not when the loans are recent or school has just been completed. For student loans to be discharged in bankruptcy, you must prove that the loans have caused undue hardship. This usually involves showing proof that you’ve made a constant effort to stay on top of payments and proof of extremely low income.
3) More Recent Credit Card Debt
A common misconception is that someone planning on going bankrupt can go on a shopping spree only to have the charges wiped away as though they never happened. Bankruptcy is a serious decision made when debt has grown to a point that finances have become an insurmountable burden. It’s not uncommon for a court to determine those latest charges aren’t a cause of the current financial situation and may even be classified as attempted fraud.
4) Back Taxes
Taxes can be a hairy situation in bankruptcy. Income taxes, tax penalties, unpaid withheld taxes, and even Social Security taxes cannot generally be discharged. There are few exceptions to this, one of which is if the taxes due are for a return due more than three years ago. Depending on the nature of the taxes, it could be possible to discharge some tax debts, but not usually.
5) Criminal Restitution
Fines and penalties imposed for breaking the law are not dischargeable in bankruptcy under any circumstances.
6) Divorce Legal Fees
Legal fees related to a divorce can’t be discharged in bankruptcy. This also includes debts from a marriage. For example, if one of the terms agreed upon in the divorce was for one spouse to pay their ex-spouse’s credit card debt, the spouse will still be liable for that debt.
Bankruptcy will not discharge your mortgage.
Despite the things bankruptcy cannot discharge, it may be an extremely helpful option to regain control of your finances. Don’t let this list of restrictions deter you from getting the help you need.
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Are you or a loved one in New Jersey is looking for financial relief and are considering bankruptcy, but don’t know where to start? Let our experienced and knowledgeable attorneys help.