When filing for bankruptcy, debts are divided into categories as either dischargeable or non-dischargeable debts. Assuming you properly file for bankruptcy and comply with all court requirements, at the end of your bankruptcy case, the court will issue an Order discharging your legal obligation to pay the dischargeable debts. Dischargeable debt covers many of the more common forms of debt, including many credit cards and medical bills. Certain debts are non-dischargeable, however, and filing for bankruptcy will not affect them as drastically. Dischargeable debt covers many credit cards and medical bills. Certain debts are non-dischargeable, however, and filing for bankruptcy will not affect them as drastically. A Kansas City bankruptcy lawyer can guide you through the bankruptcy process if you are concerned with what debts you might be able to discharge by filing for bankruptcy.
Examples of non-dischargeable debt include:
- Child and spousal support that you owe
- In most cases, student loans
- Overdue income taxes that are less than three years overdue
- Court judgments against you if you caused the death of someone due to drunk driving
- Debts resulting from your willfully harming another person or his or her property
In some circumstances, debts that a bankruptcy court would ordinarily discharge can become non-dischargeable. For example, the following debts can be non-dischargeable:
- Debts that you incurred via fraudulent or criminal means (e.g., writing bad checks, embezzlement, or theft) (note, however, that the creditor must generally challenge the debt when you file for bankruptcy and prove that you obtained it illegally in order for the court to consider the debt non-dischargeable)
- Debt that you took on in order to pay off non-dischargeable debt
- Debt within 90 days of your bankruptcy filing (e.g., recent cash advances or credit purchases), especially if for the purchase of what are considered luxury items
- Any debt – even if it were dischargeable – that you failed to list in your schedule of assets and liabilities
Handling Non-Dischargeable Debts
Non-dischargeable debts, like those listed above, will remain beyond your bankruptcy filing. In most cases, a creditor holding non-dischargeable debt does not have to do anything to protect its claims on the debt. Though non-dischargeable debt survives a bankruptcy filing, the filing may prevent creditors holding non-dischargeable debt (as is the case with all types of creditors) from making efforts during the bankruptcy to collect on that debt, such as filing lawsuits or garnishing wages.
Renegotiating non-dischargeable debt can be difficult, as non-dischargeable creditors can range from the federal government or a family law court to victims of accidents or ex-spouses. Debtors often benefit by working with an experienced bankruptcy to determine options regarding non-dischargeable debts after the completion of the bankruptcy case. If payments are to continue, debtors should seek a payment schedule that they are able to make, which can include a lengthier repayment plan, lower interest rates or an agreement to settle the debt for a lesser amount. The burden is on the debtor to prove why they need such a change.
To learn more about how you can handle non-dischargeable debts while you are undergoing bankruptcy, contact a Kansas City bankruptcy attorney at The Sader Law Firm.