19:50 22 March in Bankruptcy



When talking about bankruptcy you frequently hear about dischargeable debt and non-dischargeable debt, but people are often confused about what these words mean and when they apply.  We’d like to clear this up a little bit.  In this post, we are going to provide some definitions and explanations of what these words are all about, and also how they apply to you as an individual.

Discharcheable Debt

First, what is dischargeable debt?  A dischargeable debt is an obligation that can be wiped out by a bankruptcy discharge.  This means that once you receive your discharge you are no longer obligated in these debts, and creditors cannot come after you to collect.  Now, most debts can be liquidated or reorganized, but some of them cannot.  Those debts are known as non-dischargeable.

Non-Dischargeable Debt

Some debts are always non-dischargeable unless you can demonstrate extraordinary circumstances to convince the court otherwise.  This category can include debts that you fail to list on your bankruptcy petition.  Such debts are non-dischargeable unless you can prove that the creditor had actual knowledge of the bankruptcy.

Other non-dischargeable debts can include certain types of taxes like payroll taxes, federal tax liens, and fraud penalties.  Child support debts and debts to a spouse that come from a divorce are also non-dischargeable.  Judgements from DUI’s, homeowner’s association fees, and student loans are also frequently non-dischargeable.

Bankruptcy Mistakes

It is worth mentioning that the court may deny a Chapter 7 bankruptcy discharge if the debtor fails to follow court rules and procedure.  If the debtor violates these rules often enough, the court may deny the entire petition and any chance for a discharge.  Remember, you do not have an absolute right to discharge all of your debts.  Everyone must follow Section 727(a) of the Bankruptcy Code.  This section lists all those reasons why the court may deny a discharge.  Not following the rules can lead to creditors or trustees objecting to the Chapter 7 after discharge.

Creditor Objections

Yes, your creditors are allowed to object to a discharge.  The creditor will have to prove to the court that the particular debt should not be discharged, and most of these disputes arise over credit card purchases of luxury items.  If the debt is owed to a single creditor, comes to more than $650, and was incurred within 90 days of filing for Chapter 7, then the creditor may be able to make a convincing case that debt should not be dischargeable.  In such cases, the debtor will have to prove that they intend to pay the charges back, or that the goods are not actually luxury items.

Cash advances are also likely to be disputed by creditors.  This is especially true if they add up to more than $925 and were obtained within 70 days of filing for bankruptcy.

If you have questions about whether or not your debts are dischargeable, or if you just have general questions about bankruptcy, please feel free to contact our offices.  We can schedule you a free consultation to speak with an experienced bankruptcy attorney.