People who experience major debt trouble and have no option but to file for Chapter 7 bankruptcy normally believe that avenue will eliminate debt, or discharge all debt. While people will certainly receive a discharge for most of their debt, there are many debts that the discharge will not eliminate. Here are the debts that do not get discharged under Chapter 7 bankruptcy:
Alimony
If a spouse is legally responsible and ordered to pay alimony to a former spouse, this obligation will not be included in the chapter 7 discharge. Although it is a common myth that bankruptcy can solve steep alimony orders, this is nothing more than a myth in most cases.
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Child Support
Just as alimony obligations will not be wiped out, people filing chapter 7 bankruptcy will still have to make child support payments.
Taxes
Of course, some taxes can be discharged under Chapter 7 bankruptcy. However, not all taxes can be cleared and this is made quite clear during the discharge process. For specifics, potential filers should seek feedback from a bankruptcy trustee.
Student Loans
When student loans are guaranteed or made by a government body, they cannot be discharged under Chapter 7 bankruptcy. In many cases, steep student loan payments are cited as the reason why people file for bankruptcy in the first place. Bottom line: government-guaranteed or issued student loans (or other education benefits) cannot be discharged.
Restitution Under Civil Law
In instances where someone has caused injury or death as a result of some "willful and malicious action," such restitution obligations will not be discharged under Chapter 7. Normally, such restitution will be ordered under Civil law.
Restitution Resulting From Injury Caused by a DUI
People who are ordered to pay restitution as a result of a DUI (driving while intoxicated) conviction cannot use Chapter 7 to discharge such debt.
Restitution Under Criminal Law
In some cases, where the debtor has been convicted of a criminal act and ordered restitution, certain debts cannot be discharged.
As evidenced by the long list of exclusions, many of the reasons why people will file for Chapter 7 bankruptcy cannot be discharged under the Bankruptcy Code. Of course, there are often exceptions to certain types of the debt listed above, which underscores the importance of seeking the advice of a bankruptcy trustee or lawyer.
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