Bankruptcy eliminates debts that are classified as dischargeable. These can vary but may include credit card debt, other unsecured loans, medical bills, some auto accident bills, unpaid utility bills, and unpaid rent. Other debts are not so easily eliminated. A person may be stuck with the following types of debt even after filing a Chapter 7 or Chapter 13 bankruptcy.
- Student Loan Debt: In most cases, student loan debt is not easily discharged through a bankruptcy. However, under Chapter 13 bankruptcy the debtor may receive some relief. A plan is submitted to repay creditors over a period of time, usually three to five years. A court will determine the size of the loan payments, not the loan holder. The remainder of the loan will still be owed when the debtor comes out of bankruptcy. In order to totally eliminate student loan debt, the debtor must show that the repayment of the loan will cause an undue hardship. An example of this would be a disability that prevents the debtor from working.
- Alimony and Child Support: Alimony and child support payments will not usually be eliminated by filing for Chapter 7 or Chapter 13 bankruptcy. Exceptions to alimony payments may occur if a third party has become involved in the support arrangements. Another exception may be allowed if the divorce decree has incorrectly mandated payments that are not truly domestic support.
- Income Tax Debt: Tax debt that is owed to the IRS is difficult, but not impossible, to discharge through bankruptcy. There are complicated requirements that must be fulfilled, and the burden is tough to meet. An attorney should advise in this situation.
- Other Miscellaneous Debt: Other Miscellaneous Debt: Other types of debt that are not dischargeable under Chapter 7 bankruptcy include condo and HOA fees, loans from retirement plans, and court fees and penalties.
A qualified attorney should be consulted when considering whether to file for bankruptcy.