Filing for bankruptcy allows you to discharge a wide range of debts, freeing you from the stress of owing money to a dozen different creditors. However, not every debt automatically becomes wiped away when you successfully pass the tests for filing the Chapter 7 style of bankruptcy. Learn about these six debts that are usually excluded in this type of filing so you can figure out if another type of bankruptcy might work better for you.
The court can't make any decisions and issue declarations for debts that go without listing on the filing paperwork. It's possible to address a debt you miss later by hiring your lawyer to reopen the case and have a declaration sent to the forgotten creditor, but it's costly and difficult. Make sure you record every debt you have, and who you owe the money to, before starting the Chapter 7 process. The discharging process is the only way to stop creditor calls and prevent potential lawsuits.
Most Student Loans
In almost all cases, student loans are exempt from any type of bankruptcy discharging. Yet, you can still manage to get some or all of your educational debt discharged in a Chapter 7 filing if you're lucky. In order to beat the odds and include these loans in your case, you'll need to
- Prove that paying back the most lenient plan offered by the creditor will still prevent you from affording your basic needs
- Demonstrate unemployment, costly illnesses, or other hardships that keep you from paying the loan back
- File an adversary proceeding, which is an additional and separate lawsuit apart from the bankruptcy.
Child Support Amounts
Are you receiving letters from the state requesting that you pay a large amount to your former spouse to support your shared children? Don't expect Chapter 7 bankruptcy to fix this kind of problem. While there are ways to prove you can't repay the money yet by appearing in family court, none of them involve any bankruptcy directly. Your lawyer can help you decide if filing first could help you argue your case to a family court judge.
Crime Related Debts
Most types of money owed after a crime is committed rests outside the jurisdiction of a bankruptcy court decision. For example, money you owe to a person injured by a drunk driving accident or a willful and malicious action remains your responsibility to repay. This immunity extends to cover amounts owed as government fines, payments for parole services, willful property damage, and restitution ordered by any court.
Large Cash Advances
Watch out how much money you start withdrawing against your credit cards or loans in the months leading up to your Chapter 7 filing. The courts go over your financial records with a fine tooth comb to find signs of planning, so you're still on the hook for cash advances taken out within 70 days of the filing date. However, amounts totaling under $925 are included for discharging, so you can still use an advance to pay a bill or buy groceries in an emergency.
Past Bankruptcy Exceptions
Finally, consider your history of bankruptcy before choosing a Chapter 7 arrangement. While other forms of bankruptcy allow you to forgive debts that have survived former filing, this form limits the discharging of any money owed that was declared exempt in the previous case. For example, student loan debts that didn't pass the tests during your first bankruptcy are automatically exempt from the second filing, no matter what has changed or how many adversary proceedings you file. Make sure you handle your current bankruptcy as professionally as possible so that you don't end up with exempt debts that keep following you around for life.
For more information, contact an experienced bankruptcy attorney from a firm like Morrison & Murff.