Know What Debts A Chapter 7 Won't Discharge

While a bankruptcy filing can bring welcome relief from most all consumer debt, there are a few specific categories of debts that will remain after your paperwork is filed. With bankruptcy being such an important decision, it's vital to understand the full ramifications of the that action. If you have a relationship to any of the debt categories below, you might need to take actions outside of bankruptcy to deal with it. Read on to learn more about what cannot be discharged using a chapter 7 bankruptcy filing.

Income Tax Debts

If you owe money on taxes, including interest and penalties, you will probably need to make other arrangements to deal with this debt. IRS debts are a protected category and cannot be included in a bankruptcy filing. If you have the misfortune to also have tax liens placed on your property, the lien remains until you pay your taxes. The good news is that only tax debts for the past 3 years are exempt from discharge. The IRS does offer several programs to help filers deal with tax debts, such as offers in compromise and installment plans.

Student Loan Debt

While, in general, student loan debt is not forgivable with a bankruptcy filing, you may still be able to get some relief if you meet the qualifications. Since this debt category can present such a heavy burden for many, you may be able to include the debt if you can show that all three of the following factors apply to your financial situation:

1. Up until the present time, you have made a good faith effort to pay your loan obligations each month.

2. If you were compelled to pay your student loan debt after the bankruptcy, it would require a reduction in your present standard of living.

3. A financial hardship would exist even after the bankruptcy discharged other debts, and that hardship is expected to continue throughout the debt repayment period.

Child Support Debt

Payments to a minor child ordered by a court must be paid, regardless of your bankruptcy filing. Unlike with student loan debts, there are no provisions to include that debt no matter how dire your financial situation may be. Additionally, if the child support enforcement agency has placed liens on your property or garnished your wages, those penalties remain until you have made good on your back support.

To learn more about these and other miscellaneous debts that cannot be included, such as court judgments, speak to your bankruptcy attorney.