Which of My Debts Can Be Discharged in Bankruptcy?

There are many misconceptions about what kind of debt can be discharged in bankruptcy. This is partly because there are so many rules that apply to different types of debt. For example, some debts are never dischargeable and some debts can be discharged when you file a Chapter 13 bankruptcy, but not when you file a Chapter 7 bankruptcy. We’ll take a look at a few different situations here.

Some debts that can never be discharged in bankruptcy include domestic support obligations, meaning child support and spousal support, debts for personal injury or death caused by driving while intoxicated, payments of restitution, or fines or penalties owed to the government.

One of the largest debts that most people have, that they think is non-dischargeable in bankruptcy, is student loans. However, that is not always the case. Student loans can be dischargeable in bankruptcy, but it is difficult to do. You are required to prove that repayment of the student loan would cause an undue hardship on you and your dependents. The Courts look at several different factors when deciding whether a discharge of your student loans should be granted.

Another debt that many people think cannot be discharged in bankruptcy is tax debt. Recent tax debt is likely not dischargeable in bankruptcy. However, older tax debt that falls under a certain timeline might be dischargeable in a bankruptcy. It is helpful to an attorney if you obtain your tax transcripts from the IRS for the years that you owe taxes on, so that they can assess the debt and determine if it would be dischargeable in bankruptcy. Even if it turns out that your tax debt is not dischargeable in bankruptcy, a Chapter 13 bankruptcy might be able to help you reorganize your debt, discharge some unsecured debt and pay off your taxes.

There are also some debts that are presumed to be non-dischargeable in a Chapter 7 bankruptcy. These include debts owed to a single creditor and aggregating more than $500 for luxury goods or services or services incurred by an individual debtor within 90-days before filing the bankruptcy petition, and cash advances aggregating more than $750 that are extensions of consumer credit under an open credit plan or within 70-days before filing a bankruptcy petition.

As you can see, the rules can get complicated. It is important to speak with a knowledgeable bankruptcy attorney to determine if bankruptcy is the right option for the types of debt that you have. Call Platt & Westby, P.C. today at 602-277-4441  on contact us through our website to schedule your no obligation bankruptcy consultation to find out if bankruptcy is right for you.

Mallory Powers, Phoenix Bankruptcy Attorney