Most, but not all, debts are written off, or “discharged,” in a bankruptcy case. Is there a simple way to know what will and what will not be discharged in a Chapter 7 bankruptcy?
No, not really.
I can give you a list of the categories of debts that can’t, or might not, be discharged, but some of those categories don’t have clear boundaries, and some depend on whether a creditor is going to challenge the discharge and how a judge might rule.
But why can’t it be simple? Here’s what you need to know:
1) All debts are discharged, EXCEPT for those that fit within an exception.
2) There ARE a lot of exceptions, BUT if you tell your attorney everything, you are likely to discover whether you have any debts that may not be discharged. Surprises are rare.
3) Some debts are never discharged, NO MATTER WHAT: for example, child or spousal support, criminal fines and fees, and withholding taxes.
4) Some debts are never discharged, but THAT’S ONLY IF the particular debt fits certain conditions: for example, income taxes, depending on conditions like how long ago the taxes were due and when the tax return was filed; and student loans, as long as conditions of “undue hardship” are not met.
5) Some debts are discharged, UNLESS timely challenged by the creditor and resulting in a ruling by the judge that the debt meets certain conditions involving fraud, misrepresentation, larceny, embezzlement, or intentional injury to person or property.
6) A few debts (used to be many more) can’t be discharged in Chapter 7, BUT can be in Chapter 13: for example, divorce debts other than support.
The bad news: as simple as I would like to make it, determining what debts aren’t dischargeable isn’t simple. But there’s more good news than bad. First, for many people all the debts they want to discharge WILL be discharged. Second, an experienced bankruptcy attorney can predict which of your debts will be discharged. And third, if you have troublesome nondischargeable debts, Chapter 13 can be a decent way to keep those under control.
If you are in New Jersey and looking into bankruptcy, call Jennifer Weil now to schedule a consultation: (201) 676-0722.
Photo credit: Jason Meredith
