These difficult financial times which include lay-offs, company closures and cutbacks have placed many individuals into a state of financial distress which may be unrecoverable. Despite fairly recent changes in the law which make it harder and more costly to do, many people are still finding that bankruptcy protection is the only solution to their circumstances. However, while a bankruptcy filing is intended to grant an individual an “economic fresh start,” they need to be aware that not all obligations can be discharged through this process.
First among the items which cannot be discharged through bankruptcy are taxes for the current and previous three (3) year period. This includes federal, state and local taxes, as well as any resulting interest, penalties and fines. In addition, non-tax related penalties and fines owed to nearly any government entity are also not covered by a bankruptcy discharge. This would include such items as traffic tickets, criminal fines, probation costs, and similar assessments.
Also not eligible for discharge are any debts that the consumer fails to list on their bankruptcy petition unless the creditor was provided with notification by the bankruptcy court or other interested parties. This is one of the many reasons that the services of a qualified attorney specializing in bankruptcy law are critical in this process.
Debts such as child support, alimony and other Family Court ordered debts are usually not covered by a bankruptcy discharge. Student loans are also rarely allowed to be discharged in these proceedings unless the debtor can prove “undue hardship,” which is a very difficult standard to meet in the eyes of the bankruptcy court.
Money owed to creditors for “luxury purchases” of more than $500.00 that occurred within ninety (90) days of filing are also not covered in bankruptcy proceedings. Also, any debt which was fraudulently obtained by the debtor cannot be discharged in a bankruptcy.
Due to the complicated nature, gravity and long term effects of a bankruptcy filing, it is advisable to obtain the services of the attorney, who specializes in this area of practice.