The goal of a bankruptcy case is to get the discharge. This is true whether your bankruptcy is in Brooklyn, Queens, Manhattan, Long Island or anywhere else in New York or the rest of the U.S. And it’s the same whether it’s a Chapter 7, Chapter 11 or Chapter 13 bankruptcy.
The discharge is what gives you the “clean slate” or the “fresh start.” It means you are no longer obligated to pay the unpaid portion of unsecured debts such as credit card debt, and that those creditors are no longer permitted to seek payment from you.
However, there are also certain types of debts that are “non-dischargeable.” That is, you still have to pay them in full even after your bankruptcy case is complete. Here’s a list of some of those non-dischargeable debts:
1. Any debts that you failed to include on your list of debts for your bankruptcy filing. There is case law stating that unlisted debts in a no-asset case (Chapter 7 only) can be discharged — but the safest course is to list all debts. As for Chapters 11 and 13, an unlisted debt will not be discharged unless the creditor was given notice in time to file a claim, or is provided for in a repayment plan.
2. Debts resulting from criminal activity (e.g., fines levied by the court) as well as debts resulting from death or injury caused intentionally by you or caused while under the influence of drugs or alcohol.
3. Student Loans. There’s been discussion in Congress of a more lenient standard for discharging student loans. The American Bankruptcy Institute recently recommended discharge of all student loans more than seven years old. But until you hear otherwise, you still have to pay student loans back regardless of any bankruptcy filing. The only exception is “undue hardship,” with heavy emphasis on hardship.
4. Tax liabilities incurred within the previous 3 years. And that goes for federal, state and municipal taxes.
5. Debts that were fraudulently incurred. The classic example is where you max out your credit cards prior to a bankruptcy filing (which I discussed in a previous post) under the mistaken belief that you’ll be able to just wipe away all of that debt once you file. Fraudulent debts also include any debts you incurred where you lied or misrepresented yourself, e.g., to get a loan, as well as any attempt to pay off taxes (non-dischargeable debt) with a credit card (which would otherwise normally be considered dischargeable debt).
6. Alimony and court-ordered child support.
7. Secured debt, i.e., your mortgage, your car payments or other debt incurred that is backed by collateral. Technically, these are dischargeable, but you can’t discharge the lien or security interest the creditor has in the collateral. (“Debts are dischargeable, but liens survive.”) So for all intents and purposes you need to pay these back in full or the secured creditor has the right to the collateral (e.g., the house or car) via the bankruptcy process.
To learn more about the bankruptcy process, please feel free to contact experienced bankruptcy lawyer Bruce Weiner for a free initial consultation. You can get all of your questions answered about what you can keep and what you can’t as well as which of Chapter 7, Chapter 11 or Chapter 13 would be the right option for you.
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