Can Bankruptcy Clear All Debt?
Most consumers who are considering filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy are doing so because they are assuming that a bankruptcy filing can help them to get their debt under control. With a Chapter 7 case, consumers are presuming that they will be eligible to have their debts discharged within a few months, while Chapter 13 debtors are assuming that, once the terms of their bankruptcy repayment plans have been fulfilled, they will be eligible to have remaining debts discharged. However, this is not always the case. There are some forms of debt that are “non-dischargeable” in a personal bankruptcy case in Massachusetts.
Before you file, it is important to understand that, for some debtors, bankruptcy does clear all debt. Yet for other debtors with non-dischargeable debt, a bankruptcy proceeding will not provide the same type of fresh start.
What Types of Debts can be Discharged in a Consumer Bankruptcy Case?
First, there is good news: most kinds of consumer debt are indeed dischargeable in a bankruptcy case. In other words, by seeking bankruptcy protection, you can be eligible to have your debts cleared. Examples of common types of debt that are dischargeable in a bankruptcy case include but are not limited to:
- Credit card bills;
- Personal loan; and
- Civil judgments you owe from lawsuits.
In some cases, it may be possible to discharge student loan debt and tax debt, but these kinds of debts can be more complicated to discharge. It is also critical to understand that, although many types of civil judgments can be discharged in a bankruptcy case, certain kinds of civil judgments may not be dischargeable.
What are Non-Dischargeable Debts?
Non-dischargeable debts cannot be discharged in any bankruptcy proceeding. These include:
- Child support;
- Civil judgments from your intoxicated driving;
- Restitution or penalties from a criminal conviction;
- Payroll taxes;
- Federal tax lien;
- Tax fraud penalties.
In some cases, as we mentioned above, tax debt may be dischargeable. For a tax debt to be wiped out, it must be an income tax debt, it must be at least three years old, and you must have filed a tax return for the debt. A bankruptcy lawyer can discuss other requirements with you. When it comes to student loans, this type of debt may be dischargeable if you can show that you have attempted to make payments on the student loan but continuing to do so would represent a hardship. Again, you should discuss student loan with a Massachusetts bankruptcy lawyer since it can be difficult—but not impossible—to wipe out in a consumer bankruptcy case.
Debts Only Dischargeable in a Chapter 13 Bankruptcy
Some types of debts can be discharged through Chapter 13 bankruptcy but not Chapter 7 bankruptcy, such as:
Marital settlement agreement debts (but not alimony or child support); and
Other types of debts that cannot be wiped out in a Chapter 7 case may be eligible for discharge in a Chapter 13 case.
Seek Advice from a Massachusetts Bankruptcy Lawyer
Do you have questions about dischargeable and non-dischargeable debt? An experienced Massachusetts bankruptcy attorney can assist you. Contact the Law Office of Rachel M. Matos to speak with a consumer protection advocate about your situation. 508-206-9334