When hard times hit, and you are facing insurmountable debts, declaring bankruptcy may seem like the most sensible thing to do. Bankruptcy is a legal process that provides debt relief for businesses and individuals who cannot pay their debts. However, it is important to understand from the onset that bankruptcy is not for everyone.
Bankruptcy is meant for honest people who find themselves caught up in debts that they cannot pay back. Thus, there are certain debts and financial obligations that cannot be relieved by bankruptcy. These are known as non-dischargeable debts, meaning that you must pay them in full even after declaring bankruptcy.
Below are the three kinds of debts that generally cannot be discharged in bankruptcy.
Child support and alimony
Household support obligations like child support and alimony are subject to a different court’s order. As such, they’re treated as non-dischargeable debts when declaring bankruptcy. In other words, if your wages are being garnished to settle past and current alimony or child support obligations, then filing for bankruptcy will not put an end to them.
Student loans
Most people understand that student loans generally cannot be discharged in bankruptcy. This is true of both Chapter 7 and Chapter 13 bankruptcies. That said, there are instances when you can discharge all or part of your student loan. However, the requirements for such a discharge are usually quite difficult to meet.
First, you must prove that paying your student loan will result in undue hardship that will prevent you from meeting your basic needs. In addition, you must prove that your current dire financial situation is bound to continue indefinitely.
Other non-dischargeable debts
There are other categories of debts that you cannot discharge through the bankruptcy process. These include:
- Secured debts
- Debts, such as restitution, arising from a crime
- 401k loans
- Government debts like fines and penalties
- Debts stemming from DUI accidents
One of the misconceptions about bankruptcy is that you can use it to get rid of your debts and turn over a new page in life. While bankruptcy can help you out of a financial mess, it cannot discharge all of your debts. You must understand what debts can be discharged by bankruptcy before filing.