Individuals considering Chapter 7 bankruptcy protection often wonder exactly which debts will be eliminated (discharged), and which debts may still have to be prepaid.
Generally, unsecured debts such as credit cards, medical bills or personal loans will be discharged unless the creditor can establish fraud, or that the debt was incurred too close to the bankruptcy filing date with no reasonable expectation of repayment. If a credit card company wants to challenge whether a particular debt should be discharged, they need to file a Complaint with the bankruptcy court. They often choose not to do so either because the amount is not significant, or because they have no basis for a challenge.
There are some types of debts that are not dischargeable because they are listed in Bankruptcy Code Section 523(a). Some of these debts include:
• Most tax debt
• Debt incurred under false pretenses or fraud
• Domestic support obligations, including alimony and child support
• Debts for willful and malicious injury to another or their property
• Most government fines or penalties
• Student loans (except in rare cases of hardship)
• Death or injury due to DUI
If the creditor alleges false pretenses, fraud or malicious injury, they need to file a Complaint to prove their claim and convince the court that their debt falls under section 523(a) and should not be discharged. The other types of debts listed above do not need a Complaint and are simply not eliminated by the bankruptcy discharge.
It is not always easy for a debtor to determine whether a particular debt is likely to be challenged by a creditor, or whether the debt falls under Section 523(a) of the Bankruptcy Code. Consequently, it is often best to consult with an attorney to get advice on how the discharge will benefit the debtor.
For more information or a consultation, please call 661-210-5657 or e-mail mjf4bk@ca.rr.com .