Sometimes, when you have too much debt to pay back and you do not have the means of doing so, declaring bankruptcy may seem like the only solution. However, it is important to realize that not all kinds of debt can be discharged by declaring bankruptcy. Indeed, there are quite a few kinds of debt which you can not solve by declaring yourself bankrupt.
The first on our list is going to be student loans. Student loans can not generally be discharged through personal bankruptcy, especially if you are declaring bankruptcy right after graduating. What if you really can not pay off your student loans? Each court may have different criteria for determining whether or not to discharge you. You may have to show that you tried in good faith to pay off your student loans, that they are causing you significant financial hardship, and that you are unable and will be unable to pay them off for a large portion of the repayment period.
Income tax debts are also usually not discharged by bankruptcy. If you are struggling with tax debts, it’s best to go to a professional tax service to help you sort out your taxes and see whether there are any exemptions that you are entitled to which you may have missed. There may be other solutions available to you, such as setting up an installment plan for your payments.
Mortgages are another example. Since there is a lien on your home, you cannot discharge the mortgage by declaring bankruptcy. This does not mean that you necessarily have to give up or lose your home. If you somehow manage to come up with the payments, you usually will be able to keep your house.
The same goes for your car loan. If you declare bankruptcy and cannot pay off the loan you took out to buy a car, your creditor can simply take the vehicle. Again, you do not necessarily have to lose it. If you can pay your loan, you can keep it. You may also be able to cut a deal with your creditor to keep your car in exchange for paying off most or part of your car loan.
Back child support is another example. If you declare bankruptcy, you still have to pay child support you owe. The same goes for back alimony payments. They cannot be discharged under personal bankruptcy.
Penalties and fines for breaking the law, such as most traffic tickets or other fines, are never discharged when declaring bankruptcy. The same goes for any restitution that you may owe.
The same goes if you were driving under the influence of alcohol and it resulted in another individual’s death or personal injury. You cannot use bankruptcy in order to free yourself from any debts that resulted because of this.
Keep in mind that just as there are exceptions for you, there are exceptions for creditors. There are certain debts that are usually discharged, but if a creditor comes forward with an objection, the court may rule in their favor and you may have to pay up.
Some examples include debts resulting from your fraud or from willful and malicious acts that you have committed. The same goes for embezzlement and larceny. Make sure you list all of your debtors and creditors in your bankruptcy statement, as the ones you do not list will also be included in this category.
Again, always seek legal advice before declaring bankruptcy.