What debts are non-dischargeable and what debts are dischargeable in a chapter 7 bankruptcy?

Non-dischargeable debts

1) Student loans- Sorry!  Totally non-dischargeable unless you can prove undue hardship which is very hard to prove.   Any loan for any educational purpose is probably not dischargeable in bankruptcy.

2) Government fines, fees, and penalties- Generally not dischargeable in a bankruptcy.  Any ticket or fine from a government agency is non-dischargeable.  The exception to this rule is the three-year old income tax debt.  Generally the government exempts its debts from the bankruptcy system.

3) Spousal and child support obligations- All non-dischargeable and in fact the trustees often ask if these obligations are being paid whether the debtor is the party that owes the support or the party that is owed the support.

4) Debts involving criminality and fraud-Not dischargeable and drunk driving is specifically mentioned in the bankruptcy code under debts that are non-dischargeable.

Dischargeable debts

1) Credit cards and personal loans- Generally all dischargeable.  The exception is when the creditor can prove that you had no intention to pay back the debts when you incurred them.  They do this by looking at when you charged something and what you charged.  Generally old charges are safe as are all charges for necessities.  But recent large charges on credit cards for luxuries might be challenged by a creditor at an adversary hearing in bankruptcy court.

2) Medical debts- Usually dischargeable without a problem unless you got some purely cosmetic surgery recently that you had no intention to pay for when you underwent the surgery.

3) Deficiency balances-Deficiency balances on autos, jewelry, furniture, and even second and third loans on homes are all dischargeable in a bankruptcy without a problem if the creditor has already repossessed the original property.  If the creditor has not then all he can do is recover the property.  He must leave you alone.

4) Debts not listed in the bankruptcy- There is case-law that states that if there is an unintentional failure to list a debt in the bankruptcy then it is dischargeable if there was no fraud, and there were no assets that were distributed by the trustee, and you received your discharge.  These are 9th circuit rulings and there are two cases that support this principle so don’t worry about this one.

E-mail me today at farquharesq@yahoo.com if you have a particular debt that you have questions about.

I am a bankruptcy lawyer practicing bankruptcy law in San Diego.

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