Debts That Remain After Bankruptcy

Filing for bankruptcy can be an overwhelming process. It is often seen as a last resort for people facing insurmountable debt. While bankruptcy provides relief and a fresh start for many, it’s essential to understand that not all debts are wiped clean, referred to as “discharged.” There are some specific obligations that you could still be responsible for even after filing for bankruptcy.

In this article, we will identify and analyze those debts, ensuring that you are well-informed before taking this significant financial step. If you have questions about the process, talk to an experienced bankruptcy attorney near you.

Secured Debts

Secured debts are loans that are tied to assets, such as a house or a car. If you do not pay your car loan, for example, the lender will repossess your vehicle. Secured debts are different from unsecured debts like credit card debt and medical bills.

When you file for bankruptcy, you will have to decide whether you want to keep the property and continue paying the debt or surrender the property and discharge the debt. If you choose to keep the property, you’ll need to continue making payments on the loan. The most common secured debts are:

• Mortgages: Bankruptcy will not remove your obligation to pay your mortgage. A Chapter 13 bankruptcy can delay foreclosure and give you time to catch up on late payments. If you want to keep your home, however, you must continue making regular mortgage payments.
• Car loans: Like mortgages, bankruptcy does not erase your car loan. You must continue paying off the loan if you wish to keep your vehicle.

Student Loans

Student loans are notoriously difficult to discharge through bankruptcy. To do so, you must prove “undue hardship,” which is a significant challenge. Bankruptcy courts and U.S. Bankruptcy Code have set a high standard for proving undue hardship, making it extremely rare to discharge student loans.

Child Support and Alimony

Filing for bankruptcy does not eliminate any obligations for child support or alimony payments. These are considered priority debts and will survive bankruptcy.

Tax Debts

Income tax debts may or may not be dischargeable, depending on various factors:

• The type of tax owed
• The timing of the tax return filing
• Whether you filed fraudulent returns
• The age of the tax debt

It is crucial to consult with a bankruptcy attorney to determine if your tax debts are eligible for discharge.

New Debts After Bankruptcy Filing

Any debts you incur after filing for bankruptcy will not be included in the bankruptcy discharge. This means you are fully responsible for these new debts. This includes new unsecured debts, like credit card and medical bills.

Debts Not Included in Bankruptcy Filing

Certain debts may not be included in your bankruptcy filing due to intentional omissions or other reasons. These debts will remain your responsibility after the bankruptcy process.

Criminal Fines and Restitution

You cannot discharge fines or restitution resulting from criminal convictions in the bankruptcy process.

Homeowners Association Fees

If you own a home in a community with a homeowners association (HOA), filing for bankruptcy will not release you from any outstanding HOA fees. You will need to continue paying these fees as agreed.

Court Judgments

If a creditor obtained a court judgment against you before you filed for bankruptcy, the bankruptcy discharge will not apply to that particular debt. This may also be the case for certain court judgments related to some lawsuits.

The Importance of Consulting with a Bankruptcy Attorney

Navigating the complexities of bankruptcy law can be challenging without proper guidance. Consulting with a bankruptcy attorney is crucial for several reasons:

• Expert advice: A bankruptcy attorney specializes in bankruptcy law and can provide you with personalized advice based on your unique financial situation and the types of debt you have.
• Understanding eligibility: An attorney can help you determine if bankruptcy is the right choice for you and which type of bankruptcy (Chapter 7 or Chapter 13) is most suitable for getting rid of certain debts.
• Maximizing debt discharge: An attorney will work to ensure that you include all eligible debts in your bankruptcy case, maximizing the debt discharge and the relief you receive.
• Protection from creditors: Once you hire an attorney, creditors are required to communicate with them instead of you directly, offering you peace of mind during the bankruptcy process.
• Avoiding mistakes: Filing for bankruptcy involves extensive paperwork and legal procedures. An attorney can help you avoid costly mistakes that could hinder the success of your bankruptcy petition.

While bankruptcy can provide significant relief from debt that feels overwhelming, it’s vital to remember that not all debts will be discharged. Talk to an experienced bankruptcy attorney before taking any steps toward bankruptcy to understand what you will and will not be able to discharge.