Which debts cannot be discharged by bankruptcy?

On Behalf of | Apr 30, 2020 | debt relief |

Superior financial literacy is not a strength of most people. Considering many of us aren’t taught how to manage our finances properly, and figure it out in “trial by fire” scenarios, financial woes are not a surprise. Even the most financially adept people in the world incur overwhelming debt. 

That said, there are options to provide relief for those stricken with massive debt, and bankruptcy sits atop the list. In 2018, consumers (non-business) filed for bankruptcy relief over 750,000 times. The stigma of bankruptcy has been decreasing as it is a very viable option for those that want the debt boulder off their back. 

Many debts can be wiped clean through Chapter 7 or Chapter 13 consumer bankruptcy, including:

  • Credit card debt
  • Medical debt
  • Overdue bills that have been sent to collection agencies
  • Personal loans
  • Utility bills
  • Unpaid or overdue taxes
  • Debt related to marital property division (dependent on state law)

Chapter 7 or Chapter 13 bankruptcy is not all-inclusive

Bankruptcy can offer relief for numerous debts, but if your financial issues circle the following debts, bankruptcy won’t be able to help.

  1. Student Loans: Student loans can follow you around for decades. While not entirely impossible, there is a very slim chance that you could get your student loans discharged. Your best path may be to consolidate your loans, which can be sought out from numerous companies or Chapter 13, to seek a more friendly payment or seek other relief options.
  2. Recent unpaid income taxes: Recent income taxes fall into the student loan “not impossible, but very difficult” to have discharged. If your unpaid income taxes are three or more years old, you have a better chance to have them dismissed.
  3. Secured debts: These include mortgages, auto loans, or other expensive purchases you have financed, like an engagement ring or boat
  4. Child support
  5. Alimony and spousal support (debt incurred in divorce like ex’s legal fees or credit card debt)
  6. Any criminal debt (theft, embezzlement, vehicular manslaughter, DUI)

Once you have filed and been approved for bankruptcy, stray from going on another spending spree and work toward educating yourself on financial literacy and budgeting techniques. Bankruptcy is a long process and will affect your financial options for years. Still, if followed lawfully and managed correctly, bankruptcy can provide you with a new and positive financial beginning.