Bankruptcy Lawyer Bryan W. Stone answers the question: “Can I get rid of student loans by declaring bankruptcy?”
The reason most people feel forced to consider filing for bankruptcy is because their debts increase to unsustainable levels. Whether it’s a few large debts or many small ones, the total amount owed becomes too much to keep up with, requiring you to consider filing for bankruptcy. The hope is that bankruptcy wipes these debts away, allowing you to start fresh with a clean slate. Though that’s the goal, it’s unfortunately not always the reality. The reason is that some debts can’t be easily escaped and can instead follow you despite filing for bankruptcy protection. To learn more about which debts are hardest to shake, keep reading.
First things first, the following exceptions apply primarily to Chapter 7 and other liquidation bankruptcies. Some apply in a Chapter 13, but not all. If you’re concerned about specific categories, reach out to an experienced North Carolina bankruptcy attorney who can walk you through the process.
The first category of debts that can’t be easily shaken are tax debts. Generally, income tax debts less than three years old are not dischargeable in a bankruptcy. That said, income taxes older than three years may be discharged so long as the debtors filed a return and an offer in compromise is not pending. Money that is related to fraud or was obtained through the use of false pretenses cannot be discharged in a bankruptcy. The same goes with debts racked up in the weeks and months prior to filing. It’s possible these will be categorized as fraudulent (as you never intended to repay them) and thus the debts won’t be dischargeable.
Another category of nondischargeable debts include those related to alimony or child support. Courts are serious about holding individuals responsible for the care of their children and, in some cases, their former spouse. Courts say that public policy concerns prevent them from allowing people out of these obligations, fearing what harm could befall the children. Debts owed to unlisted creditors are also not subject to discharge. The reason here is that it wouldn’t be fair for people who were never notified about the bankruptcy to have their debts liquidated without having a chance to object.
Money owed due to willful or malicious injuries are also not dischargeable in a bankruptcy, as are those debts related to DUI death or personal injury claims. Student loans are typically not dischargeable, though there are certain limited exceptions that are rarely granted. Curiously, some condo dues and housing association fees are also nondischargeable and will be owed even after emerging from a bankruptcy.
Finally, don’t go trying to manipulate the system by simply filing bankruptcy a second time. Another category of nondischargeable debt includes those nondischargeable debts from a prior bankruptcy. If the debts couldn’t be escaped the first time around, you won’t be able to file again to get out from underneath them.
So what happens if a majority of your debts come from the above-mentioned categories? It might mean that a liquidation bankruptcy doesn’t make sense and you should consider other options, including potentially filing for Chapter 13 protection. After all, to go through the hassle and expense of filing bankruptcy only to be left with virtually the same debt as when you started wouldn’t be a good use of your time or money.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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