When you receive a “discharge” under bankruptcy it means that you are no longer liable for your debts. This means you don’t have to pay them and a creditor cannot come after you anymore.

However, there are some debts which are considered “nondischargeable” under bankruptcy law, meaning that you cannot discharge your liability on these debts.  Thus, even though you have filed for bankruptcy, the discharge will not relieve you of your responsibility to pay back the debt(s). The bankruptcy will however put an “automatic stay” on these debts giving you time to regather your finances while going through bankruptcy.  Although the following list does not include ALL nondischargeable debts, these are some of the most common.

1) Student Loans

-          In general: The term “student loans” applies to seemingly all kinds of educational loans. These include educational loans made or guaranteed by a local, state, or federal government institution. Also included are any loans where part of the loan was funded by the government or a nonprofit organization. Also some scholarships or stipends may also be nondischargeable if they were conditioned on doing something that the debtor failed to do.

-          Exception: There is a limited exception which allows you to discharge your student loan debt if the court determines that the repayment of the loans would cause an “undue hardship” on you. This is an extremely tough standard and most people who can maintain a minimal standard of living will not qualify.

2) Tax Debts

-          In general: Income tax debts going back between 3 and 4 years are generally not dischargeable. While there is some complex timing issues, tax that is nondischargeable only extends back, at most, 4 years. Sometimes, if you file your petition on the right day, you will only be liable for the last 3 years of taxes. A lawyer can advise you on the exact dates.  Other taxes included are property taxes and some tax penalties. In each case the number of years which cannot be discharged will vary depending on when you file.

-          Exception: Apply in both Ch. 7 and 13. The number of years that the dischargeability extends to will depend on when you file bankruptcy and what kind of tax is involved.

3) Debts Incurred by Fraud

-          In general: Debts incurred through fraudulent means may not be discharged. The most common instances involve charges you make on your credit card near the time of your bankruptcy.  This is because using a credit card is seen as a representation by you to the credit card company to pay for the amount charged on the card. However, there mere use of a credit card before bankruptcy does not constitute fraud. Courts look at a variety of complex factors. Most likely if you are using your credit card for basic necessities you have nothing to worry about; however, using your credit card for luxury goods is another matter.  There is a rebuttable presumption that if you buy luxury goods or services totaling more than $550 within 90 days of filing for bankruptcy you will have incurred a debt by fraud.  Likely examples of luxury goods and services would be buying an expensive watch or taking a European vacation.  Similar rules are in place for cash advances.

-          Exceptions: None. If a court finds fraud these debts cannot be discharged.

4) Family Support Obligations

-          In General: Any debt for a domestic support obligation is nondischargeable. This includes more than just child support. It includes support owed to current spouses, former spouses, children, parents or guardians of children and even the government. Other support obligations that are not dischargeable include such things as property or divorce settlements between spouses. Such debts are dealt with under 523(a)(5).

-          Exceptions: Under Chapter 13, debts falling under 523(a)(5) ARE DISCHARGEABLE.

5) Willful and Malicious Injury

-          In General: Any debt that is the result of a willful and malicious injury to a person or property is nondischargeable.  For example, if you assault or batter someone any money you owe them as a result cannot be discharged.

-          Exceptions: Some of these debts are dischargeable in Chapter 13.

6) Liability for Personal Injuries while Driving Drunk

-          In General: While debts for negligently injuring someone are dischargeable, such as when you are held liable for injuries in an automobile accident, personal injury or wrongful death that is caused because you operated a motor vehicle or similar transportation device while intoxicated by drugs or alcohol cannot be discharged

-          Exceptions: None

Although many of these debts are nondischargeable, it is important to consult an attorney who can evaluate the exact facts of your case. In many cases dischargeability is a very fact specific inquiry.

For more information about dischargeable debts, please contact a Tucson bankruptcy attorney.

Stephen Trezza, Tucson bankruptcy lawyer.