Many people think that if they simply file Chapter 7 bankruptcy, then they will get rid of all of their debts. Unfortunately, this is not the case. There are some types of debts that cannot be discharged in bankruptcy by law. This means that even if you complete bankruptcy proceedings, you still have to pay back these debts. These debts include child support, alimony, student loans, most taxes, many secured debts, and debts not listed in your bankruptcy petition.
First, child support is one of those debts that bankruptcy laws will not permit you to discharge. Whether you receive a Chapter 7 bankruptcy discharge or not, you will still owe the same amount of child support that you did before you filed for bankruptcy, or more. Therefore, if you choose to file for bankruptcy, do not do so for the purpose of wiping out your child support debt. You also should not stop paying your child support simply because you have filed for bankruptcy, since child support orders can still be enforced in some respects while you are in bankruptcy proceedings. The same rules apply for alimony or spousal support that you have been ordered by a court to pay. Despite your bankruptcy discharge, you still will owe alimony, just as you did before the bankruptcy.
Next, student loans are generally not dischargeable in Chapter 7 bankruptcy proceedings. Even if you discharge all of your other debts in bankruptcy, you still will be stuck with your student loan payments. The only exception to this rule is if the student loans will cause you “undue hardship”, which is a very high standard to meet. In order to prove “undue hardship”, you will need to show the court that not only are you unable to pay your student loan debts now, but there is very little chance in the future that you will be able to pay them, either.
Likewise, back taxes that you owe are typically difficult to discharge in bankruptcy. While there are some rare, very limited circumstances in which you may be able to discharge old income tax debts, you must meet many different requirements in order to do so. Therefore, you should not count on being able to discharge your tax debts in Chapter 7 bankruptcy proceedings.
You may have difficulty discharging secured debts in Chapter 7 bankruptcy proceedings, which are debts that are secured by property that you own, such as a house or car. While bankruptcy can eliminate the debt, it cannot eliminate the lien. This means that while you can discharge your mortgage debt in your bankruptcy proceedings, the mortgage holder still will have a lien on your house. Bankruptcy cannot prevent your mortgage holder from executing its lien on your house, i.e. taking your house from you. Thus, some people choose not to discharge secured debts, if they want to keep the secured property.
Finally, don’t forget that you must list all your debts that you want to discharge in your bankruptcy petition. If you don’t do so, you risk not being able to discharge those debts, and you will have to pay those debts back in full, despite your bankruptcy. This is why you should always be completely honest with your local chapter 7 bankruptcy attorney to discuss your specific legal situation.