Non-Dischargeable debt | Consumer Debt Group


Non-Dischargeable Debts
Non-Dischargeable debt is debt, which the Court will not discharge and the debtor is still obligated to pay. There are many debts that are not dischargeable and the debtor will still be responsible even after the bankruptcy. In most cases the following debts will not be discharged taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; non-dischargeable debts from a prior bankruptcy, student loans and debts that were induced or extended by fraud or criminal activities. Under bankruptcy law, certain luxury purchases and cash advances over $1,000 are presumed non-dischargeable within 60 days of the bankruptcy filing. The courts can go back over any charitable donations over the past 2 years and judge whether they are legitimate or not. If not the debtors could be liable to recover the money from the charity.

To give a clear view the debts, which are non-Dischargeable, are jotted down as Recent taxes Trust fund taxes Child or family support Criminal fine or restitution Auto accident claims involving intoxication Debts not scheduled Penalties payable to the government other than tax penalties Student loans Debts listed in prior bankruptcy where debtor was denied a discharge

Under the bankruptcy laws, 12 major categories of debts may turn out to be non dischargeable unless the debts fits into a narrow exception to the rule. These debts are: Student loans unless repayment would cause you undue hardship. (11 U.S.C. 523(a)(8)). Most federal, state and local taxes (11 U.S.C. 523(a)(1) and any money borrowed on a credit card to pay those taxes (11 U.S.C. 523 (a)(14)). Child support and alimony and debts in the nature of support (11 U.S.C. 523 (a)(5) and 523 (a)(18)). Fines or restitution (to the court or victim) imposed in a criminal-type proceeding (11 U.S.C. 523 (a)(7) and 18 U.S.C. 3613). Fees imposed by a court for the filing of a case, motion, complaint or appeal or for other costs and expenses assessed with such filing (11 U.S.C. 523 (a)(17)). Debts resulting from intoxicated driving (11 U.S.C. 523 (a)(9)). Debts you couldn't discharge in a previous bankruptcy that was dismissed due to fraud or misfeasance (11 U.S.C. 523 (a)(10)).

Alimony, maintenance and child support payments generally are not dischargeable. A few technical exceptions exist. In addition, 11 U.S.C. sec. 523(a)(15) provides that certain other divorce related obligations, such as payments to others, hold harmless provisions and property settlement obligations are not dischargeable if the debtor has the ability to pay them and the detriment to the spouse outweighs the benefit of the discharge to the debtor. In order to take advantage of section 523(a)(15) the spouse must obtain an order from the bankruptcy court declaring the debt non-dischargeable.

Taxes
Past due taxes create a unique situation in Bankruptcy. Taxing authorities are entitled to preferential treatment and payment. Generally, if a tax is over 3 years old from the time it was assessed or from when the return was filed, it can be discharged in Bankruptcy. Taxes less than 3 years old are non dischargeable and are entitled to be paid in full, plus interest. Most penalties, however, are discharged in Bankruptcy.

Student loans
Student loans are in a special category. Generally, they are non dischargeable in bankruptcy. However if repayment of them is determined by the court to constitute an undue hardship, them may be discharged. Also, they may be paid in payments through a Chapter 13. The student loan may be discharged if it is neither "insured or guaranteed by a governmental unit" nor "made under any program funded in whole or in part by a governmental unit or nonprofit institution." The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."

Student loans more than 7 years old used to be dischargeable under certain circumstances, but this provision was removed by an appropriations bill passed in October of 1998.

Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. If a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. An adversary proceeding is to file in the bankruptcy court to obtain a court order declaring the debt discharged.