Discharging Debts: Debts That Are Not Discharged
When you file a bankruptcy case, you're looking for relief of some kind from debts that have become unmanageable. Bankruptcy is designed to provide that relief, but it won't necessarily eliminate all your debt. In some cases you can voluntarily choose for a debt to survive the bankruptcy, like secured loans to protect your car or your house.
Other debts that will survive the bankruptcy are debts that cannot be discharged in a typical bankruptcy case. Most of these fall into two broad categories: debts that are always and automatically nondischargeable, and debts that the bankruptcy court decides are not discharged.
In this article, we talk about the debts that are automatically nondischargeable. In other words, the creditors don't have to file anything to make these debts nondischargeable.
Debts Not Listed in the Bankruptcy Paperwork
Any debts that were not listed in the bankruptcy paperwork, also called the bankruptcy schedules, will not be discharged because those creditors will not get notice or have a chance to participate in the bankruptcy case. This includes any debts that were not listed in a prior bankruptcy case but should have been.
But, if your creditor learns of your bankruptcy case through some other method, the debt is discharged. This is because a creditor with knowledge of the bankruptcy case can participate in it by filing a claim or otherwise notifying the court that it is aware of the case.
Many creditors learn of bankruptcy cases because they subscribe to services like Banko Solutions. Large creditors, like credit card companies and banks, will compare their customer databases to the information gathered by Banko and similar services to determine which of their customers have filed bankruptcy.
In some jurisdictions, the bankruptcy courts have held that debts not listed in the bankruptcy paperwork will be discharged anyway if the oversight was not intentional and if the creditor would not have received any distributions from the case, which happens in most bankruptcy cases.
Many learned authorities have written books about taxes and bankruptcy. This is perhaps the most complicated subject in all of bankruptcy law.
To determine if a tax debt is discharged or not, we have to look at several factors, including type of tax, type of bankruptcy filed, when returns are filed, and age of the taxes.
We have set out some general rules about the discharge of different types of taxes in two articles:
Debts that Arise Out of Family Law Proceedings
Most family law debt will not be discharged in a bankruptcy case (but there are a few exceptions).
A number of different kinds of debts can come out of a family law case: child support, alimony, property settlements, attorneys fees and more.
The bankruptcy code talks about two different types of family law debt. One is the “Domestic Support Obligation,” and the other is debt that arises out of a property settlement.
Domestic Support Obligations include
- Spousal or child support
- Debts that arise from separation agreements
- Attorneys fees in child support and spousal support cases
- Most debts that arise from hold-harmless clauses
- Most guardian ad litem fees
Property settlement debt usually arises when the parties agree to a divide property, but the property division will occur in the future, or over time, and a debt arises when one party is obligated to pay the other party.
For most purposes, domestic support obligations and property settlements are treated alike. In a Chapter 7 case, both domestic support obligations and property settlements are not dischargeable. But, in a Chapter 13 case, property settlements can be dischargeable. This area can be very confusing for debtors and attorneys alike because often the court must decide if the property settlement is actually a domestic support obligation in disguise.
To learn more about how these debts are treated in bankruptcy, see
Debts to Government Agencies
Debts (other than taxes) to government agencies, including federal, state and local governments, are almost always nondischargeable. This includes court fines, penalties, and criminal restitution.
There are exceptions, however. If the fine is designed to reimburse the government for money it lost because of you, it may be dischargeable. For instance, if the city government had to cut your grass because it got too high or had to clear a condemned structure from your property, that cost might be discharged in a bankruptcy case if it is designed to reimburse the city for a cost that you should have incurred yourself. But, if the city imposed a fine designed to punish you, like a speeding ticket, that debt would not be discharged.
Other debts to the government that may be dischargeable include SBA business loans and FHA home loans.
Student loans are difficult, but not impossible to discharge in bankruptcy. Because this area is complicated, we have written an entire series of articles to guide you in dealing with your student loans if you file a Chapter 7 or a Chapter 13 case. Here are some articles to get you started:
Debts for Personal Injury Due to Intoxication
If you cause personal injury because you were intoxicated while operating a motor vehicle, any debt that arises from that injury will not be discharged in a bankruptcy case.
Homeowner Association Fees
If you live in a condominium or a co-operative apartment, you will pay a monthly, quarterly or annual fee for upkeep of the common areas. Many owners of free-standing houses also pay a local homeowner’s association a periodic fee, especially in planned developments or newer suburban neighborhoods. These fees are not dischargeable in a bankruptcy case.
This can be a real problem for a debtor when a home is surrendered to the lender. The HOA fees don’t just go away when that happens. You will remain responsible for the HOA dues as long as the property remains in your name, even if you filed bankruptcy and are not living in the home. If your lender does not foreclose quickly or chooses not to foreclose, you could find yourself owing a lot of money to the HOA.
For more information:
To learn more about the debts that can and cannot be discharged in a bankruptcy case, be sure to visit these pages:
Updated by Carron Nicks September 2017