Debts That Are Not Discharged in Bankruptcy
Authored By: Legal Aid Services of Oklahoma, Inc.
Not all debts are dischargeable in Bankruptcy. Debts discharged vary under each chapter of the Bankruptcy Code but for individual debtors, some specific categories of debts are not allowed to be discharged. A debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons, either because of the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor's drunken driving.
There are three categories of debts that won't be discharged in your bankruptcy case. Some debts are never discharged; some are not discharged unless you can successfully argue that they should be; and some are not discharged only if a creditor successfully argues that they should not be.
Debts That Are Always Nondischargeable
Some types of debts are nondischargeable if they fall within one of a list of defined categories.
These debts do not require a court hearing to determine dischargeability status.
Unless the debtor can demonstrate extraordinary circumstances to override public policy, the following debts are deemed automatically nondischargeable:
- unscheduled debts (any debts the debtor fails to list on the bankruptcy petition or include on the mailing list), unless the creditor had actual notice or knowledge of the bankruptcy filing;
- certain taxes;
- debts for spousal or child support or alimony;
- debts owed to a former spouse or child if they arose out of a divorce or separation;
- debts to government agencies for fines and penalties;
- student loans (with a few rare exceptions);
- debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated;
- debts owed to certain tax-advantaged retirement plans;
- debts for certain condominium or cooperative housing fees (homeowners association fees);
- attorney fees in child custody and support cases; and,
- court fines and penalties, including criminal restitution.
Debts That Are Never Discharged
You will continue to owe these debts after your bankruptcy case is over:
- child support and alimony;
- fines, penalties, and restitution you owe for breaking the law;
- certain tax debts; and,
- debts arising out of someone's death or injury as a result of your intoxicated driving.
If you file under Chapter 7, you will also continue to owe condo, coop, and HOA fees; debts for loans from a retirement plan; and debts you couldn't discharge under a previous bankruptcy.
Debts That Are Not Discharged Unless You Prove an Exception Applies
These debts are not discharged, unless you convince the court otherwise:
- student loans, and
- regular income tax debt.
Debts That Are Discharged Unless A Creditor Successfully Objects
Some debts are discharged unless a creditor comes forward and convinces the court that they should not be. These debts include:
- debts arising from your fraud, including recent debts for luxuries of more than $675 (as of April 2016) or cash advances of more than $950 (as of April 2016) within a certain period of time before you file;
- debts arising from your willful and malicious acts;
- debts arising from your embezzlement, larceny, or breach of fiduciary duty; and,
debts or creditors you don't list on your bankruptcy papers.
Debts Not Dischargeable If a Creditor Successfully Objects
There are other types of debts not deemed automatically excepted from discharge. For these debts, creditors must ask the court to determine if they are dischargeable or not. The court will ordinarily require motions to be filed and hold a hearing when making its decision. If the creditor does not raise the issue of dischargeability or the creditor raises the issue but the court does not agree, these debts will be discharged.
These types of debts include:
- credit card purchases for luxury goods owed to a single creditor and aggregating to more than $675 (as of April 2016) and incurred within 90 days of filing for bankruptcy (the creditor must present the facts to the court, if you prove that you intended to pay the charges back or that the goods aren't "luxury" items then the debt will be discharged);
- cash advances aggregating to more than $950 (as of April 2016) obtained by a debtor within 70 days of filing for bankruptcy (again, if you can prove that you intended to pay this money back, then the debt will be discharged);
- debts obtained by fraud or false pretenses; and,
- debts incurred as a result of willful and malicious injury to another or to the property of another.