Not all debt can be forgiven by filing bankruptcy. Understanding how the court views different types of debt will help you decide if bankruptcy really is your best option.
Dischargeable debt is the type of debt can be wiped out through bankruptcy. Both Chapter 7 and Chapter 13 bankruptcies typically forgive debt from:
- Credit cards
- Medical bills
- Civil lawsuits
- Car accidents (as long as you weren’t intoxicated)
- Leases and contracts
- Personal loans
- Promissory notes
Types of debt that are never dischargeable, regardless of the bankruptcy classification, include:
- Child support
- Debts associated with a criminal judgment
- Tax debts less than 3 years old
- Compensations for injuries or death due to intoxicated driving
- Most student loans
Some debts that are considered non-dischargeable can be discharged if you can prove your inability to pay them back. You could, for example, petition the court to forgive your federal student loan, a type of debt that is normally considered non-dischargeable.
Conversely, dischargeable debt can be deemed non-dischargeable if a creditor objects to it. For example, if an ex-spouse demonstrates that losing funds from a divorce settlement would pose an excessive hardship, that debt can be ruled non-dischargeable, even in a Chapter 7 bankruptcy.
Dischargeable debt incurred from “acts of malfeasance,” such as embezzlement, malicious destruction of property, or credit obtained under false pretenses, can also be successfully contested by creditors. Debt arising from damage to property because the debtor was intoxicated is similarly vulnerable.
Still not sure if bankruptcy is the right move for you? Give me a call at 301-589-4597 or email me at [email protected]. Consultations are free, and I can help you make an informed choice that’s right for you.