Bankruptcy serves as a legal alternative to overwhelming debt, particularly for people who have mounting debts that are far beyond their income means. If you are struggling with increasing account balances, creditor calls and overwhelming debts, you might be considering Chapter 7 bankruptcy. Before you commit to liquidating your assets through a Chapter 7 bankruptcy filing, it's in your best interest to understand which debts will still remain once the process is complete. Here's a look at the debts that you cannot eliminate through a Chapter 7 discharge.
Certain Tax Debts
Recent tax debts cannot be discharged through a Chapter 7 bankruptcy. In tax terms, recent debts typically refer to those that have become due in the last three years. If you are including any tax debts in your bankruptcy, make sure that you have documentation of when it was first due.
Personal loans taken out to pay tax debts are also included in this clause. If you've taken out a loan to settle tax debts and you're still paying on the balance, that loan may not be eligible to discharge in your bankruptcy.
Debts Incurred by Fraudulent Means
If you seek a cash advance, store financing or similar funds within 60 days of your bankruptcy filing, the creditor may petition the courts to declare your debt as incurred by fraudulent means. This finding would indicate that you took out the loan with the intention of declaring it as part of your bankruptcy and never paying it back.
Larceny, Fraud and Embezzlement Restitution
When a creditor files a legal complaint for embezzlement, larceny or fraud and the courts issue a finding that you must pay restitution, those debts cannot legally be included in a Chapter 7 bankruptcy filing.
Child Support, Alimony and Divorce Settlements
Past due child support, alimony bills and other divorce settlements are not eligible for Chapter 7 bankruptcy discharge. Even if you are able to complete a Chapter 7 filing, you'll still have to pay these accounts.
Other settlements or payments included as part of a divorce settlement or separation agreement may still remain after bankruptcy as well. If your former spouse can show that you have the means to make the payment or that the discharge of the payment will cause more hardship for your dependents than the benefit you would obtain from having the debt eliminated, the courts may require you to pay the debt after the bankruptcy discharge.
Student Loan Debts
Student loan payments will follow you through a variety of financial issues, including bankruptcy filings. In most cases, student loans cannot be discharged through bankruptcy. The courts may declare an exception if your bankruptcy attorney from a firm like Kreisler Law PC Chicago can show that retaining the debt will cause an undue financial hardship for you and any dependents that you may have.
Some Car Accident Settlements
If you have been ordered to pay restitution for an injury caused by a car accident in which you were found to be under the influence, that debt will remain. Court-ordered settlements as a result of driving under the influence cannot be liquidated under a bankruptcy discharge.
Rental Property Debts
If you own a rental property and you have not yet paid the association fees or condominium dues, you may be required to pay them. The courts will not permit you to discharge those fees if you have been receiving rent payments for the property during the time when the debt was incurred. If your rental property has been unoccupied, you will need to prove this to the courts in order to consider including those charges in your bankruptcy.
Chapter 7 bankruptcy can be beneficial for helping you to clear out debts that have you stretched far beyond your current financial means, but only if you understand what you can actually discharge. With the information presented here, you can go into the process with a solid understanding of which debts you can include.