What Debts Will I Continue to Owe If I File for Bankruptcy?

If you file for bankruptcy, will you be able to erase all of your debts? This is often the assumption that individuals have when they are considering bankruptcy, but it is not always the case. Some individuals who file for Chapter 7 bankruptcy will have a fresh start with zero debts at the end of the case, but others may not if some of their debts fall into the “exceptions to discharge” under the US Bankruptcy Code. In Chapter 13 cases, some debts are ultimately discharged but others may remain ongoing when the debtor remains in a relationship with the creditor in connection with a secured debt (such as a mortgage, for example). And in some instances, a debtor will reaffirm a debt. Our South Florida bankruptcy lawyers can explain these circumstances below.

Exceptions to Discharge in Bankruptcy Cases

The Bankruptcy Code has a specific section that lists “exceptions to discharge.” These are debts that cannot be discharged in a bankruptcy case, although for some of them (as we will explain in more detail below), there are potential exceptions to the exception. This section lists the following types of debt as exceptions to discharge:

• Tax debt;
• Debt incurred through fraud;
• “Luxury” debts;
• Educational debt; and
• Family support debt.

Both tax debt and educational debt (i.e., student loan debt) can actually be discharged if you meet certain requirements, however. As such, you should discuss these types of debt in detail with your bankruptcy lawyer.

Reaffirmed Debts in Any Type of Bankruptcy

Debtors may reaffirm debt that would otherwise be eligible for discharge in circumstances where a cosigner would be left with the full liability for the debt. If you decide to reaffirm a particular debt and the bankruptcy court agrees for the debt to be reaffirmed, you will continue to owe this debt at the end of your bankruptcy case.

Debts Owed to Long-Term Creditors After a Reorganization Bankruptcy

In reorganization bankruptcy, such as Chapter 13, the aim is not to discharge all debts entirely. In this type of bankruptcy, the goal is for the debtor to catch up on payments with certain secured creditors (like a mortgage lender), and then to continue making payments on the debt still owed after the bankruptcy case ends.

Contact Our West Palm Beach Bankruptcy Lawyers Today to Find Out About Dischargeable Debts and Exceptions to Discharge

When many individuals or businesses begin looking into the possibility of filing for bankruptcy, they often assume that their bankruptcy case will end in a way that they no longer owe any debt. While this can be the case for some individuals in a Chapter 7 filing, it is not often how bankruptcy works, as we discussed above. Reorganization bankruptcies can result in some — but not all — debts being discharged, and there are always exceptions to discharge under the Bankruptcy Code that could be applicable to your case. The best way to determine if you will still owe debt after your bankruptcy case, and if so what debts and what amount, is to seek advice from one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan Delaney & Eller, PLLC, PLLC. Contact our firm today to find out more about how we can assist you with your bankruptcy filing.

Source:

law.cornell.edu/uscode/text/11/523