There are debts that are not able to be discharged in Chapter 7 bankruptcy. Bankruptcy code has information that allows certain debts to be discharged and some cannot be discharged at all. It may surprise you to find out how few debts cannot be discharged in a bankruptcy. Surprisingly, some of the hottest topics in American debt today like tax debt and student loan debt are special cases that can be discharged under the right conditions.
Restitution is defined as recompensation for an injury or a loss. Restitution fees charged to someone as a result of a judgment ordered in a criminal case or during the commission of a criminal act in court are not able to be discharged in Chapter 7 bankruptcy. Do not mistake restitution fees for judgments against you by credit card companies or other creditors. Debt to a creditor that you borrowed from can definitely be discharged in a bankruptcy even after a judgement is ruled against you. Restitution debt is specifically ruled as restitution cannot be discharged in bankruptcy court. In civil courts, this type of debt is simply called damages or judgment.
Tax debt cannot be discharged in bankruptcy court if the tax year was filed less than 3 years ago. Tax debt owed from filing three or more years ago can be discharged in bankruptcy if it was filed properly and pro-actively by the filer, not calculated or enforced by the IRS.
Student loan debt is technically able to be discharged in bankruptcy, but it rarely does get discharged. Although bankruptcy code does state that undue hardship would allow student loans to be discharged in bankruptcy, the general translation in bankruptcy court to meet the condition of undue hardship has traditionally been a complete lack of ability to earn any income whatsoever. It is in very rare cases that student loans get discharged in bankruptcy. So, if you have the ability to work, don’t count on student loans being discharged.
Government debt cannot be discharged in bankruptcy. Government refers to any governing body including your state and your city. This would include anything owed to cities like debt from a speeding ticket or moving violation, fines from breaking the law, etc.
There are always different interpretations of the law in local court systems. The information above is general information from our past experience in bankruptcy in our area, but you should definitely consult your bankruptcy attorney to find out what can be discharged for you in your own situation and local area.
Bankruptcy Law Professionals is a bankruptcy law firm in Santa Ana and Riverside. We offer free consultations with attorneys for all of our clients. Contact us at 855 257-7671 to schedule an appointment.