Chapter 7 Bankruptcy : Exceptions to discharge of Debt

Chapter 7 Bankruptcy : Exceptions to discharge of Debt

When you file a Chapter 7 bankruptcy does all of your debt get discharged – wiped out?  Typically this is the case, all unsecured debt is discharged and any secured debt on assets – like house or car-  which you choose to surrender is also discharged.  However, there are exceptions to the discharge of a debt in a chapter 7 bankruptcy.

Domestic Support obligations are not discharged in Chapter 7

One such exception is domestic support obligations which is any debt that arises from a domestic relations order (divorce or child custody) including child support, alimony, or marital debt — house, car, or credit cards.  There are some narrow differences in the classification of such debts which need to be reviewed by a bankruptcy attorney.  However, do not expect that filing chapter 7 can help you escape obligations to your former spouse or child support.

Typically taxes can not be discharged in bankruptcy

Another type of debt that is not typically able to be discharged is taxes or other debts owed to a government entity (federal, state or local).  Although the automatic stay prevents collection activity even by the government without bankruptcy court approval, these debts can not be wiped out by bankruptcy.  However, the interest on tax debt is typically stopped upon the filing of a Chapter 13 bankruptcy.  There are some exceptions to this rule that should be discussed with a bankruptcy lawyer.

Among the many other exceptions to bankruptcy discharge that are enumerated in the United States Bankruptcy Code, other debts that are not dischargeable are student loans, and debts arising from criminal activity or intentional torts (lie fraud, etc.)

Keep in mind that bankruptcy is very complicated and involves several rules and exceptions and even exceptions to the exceptions.  If you are contemplating either chapter 7 or chapter 13 bankruptcy speak to an attorney.

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