People considering bankruptcy generally struggle with high levels of debt. Sometimes, they may inaccurately assume that they can eliminate any debt not secured by significant assets. However, the rules for debt discharged during bankruptcy proceedings actually exclude numerous types of financial obligations.
There are some types of debts, like student loans, which can be eligible for discharge in very specific circumstances. There are certain debts that are never eligible for discharge even in scenarios involving extreme financial hardship.
Alimony and child support debts
Alimony involves the series of court-ordered payments from one spouse to the other during or after a divorce. Child support involves one parent paying the other to help ensure a basic standard of living for their shared children. People may fall into arrears on their support payments due to personal hardship or a desire not to pay. They could accrue thousands of dollars in unpaid support. Typically, even if someone has become completely incapable of working, they cannot discharge any past-due support amounts through a personal bankruptcy filing.
Debts related to certain lawsuits
Personal injury and wrongful death lawsuits can be incredibly expensive for defendants. Those accused of causing injury or premature death may face litigation that makes them responsible for a variety of different costs. Especially in cases involving intentional criminal conduct or impaired driving, court-ordered judgments related to personal injury or wrongful death lawsuits are typically not eligible for discharge in a bankruptcy filing.
Most tax debts
People have to pay a variety of different types of taxes, some of which can lead to very aggressive collection efforts. Unpaid property taxes can put people at risk of losing their homes through a tax auction. Past-due income taxes can lead to interest and penalties or even criminal charges. With the exception of income tax debts that are more than three years old, most tax debts are not eligible for discharge during bankruptcy proceedings.
Although people cannot always eliminate the debts that put strain on their budgets, they can frequently rework a budget after discharging other debts. Filing for personal bankruptcy can eliminate credit card debts, medical debts and many other unsecured debts so that people can pay the debts they cannot discharge. Learning more about what debts are eligible for discharge can help people determine whether filing for bankruptcy is the right solution for their financial struggles.
