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Not all debts can be discharged in bankruptcy

| Dec 17, 2020 | Bankruptcy

Filing for bankruptcy may allow you to discharge existing credit card, personal loan or medical debts. However, there are some balances that cannot be discharged regardless of whether you file for Chapter 7 or Chapter 13 protection. Let’s take a closer look at the types of debts that typically cannot be discharged by a Kentucky bankruptcy judge.

You’ll still owe back alimony or child support payments

Alimony payments are generally considered to be a domestic support obligation, which means that it won’t go away simply because you filed for bankruptcy. Child support payments cannot be discharged in a bankruptcy case because doing so would not be in that minor’s best interest. Furthermore, it may not be in the public’s best interest because it would require taxpayers to pay for basic goods and services that a parent is supposed to provide.

Student loan debts are rarely discharged

Student loan balances can only be eliminated if you can show that making future payments would create a financial hardship. Unfortunately, there is no uniform standard for determining what constitutes a financial hardship. Therefore, you are likely at the mercy of the judge overseeing your case as it relates to whether or not private or federal loans will be discharged.

How old is your tax debt?

While it may be possible to eliminate state or federal tax debt, this may only be true if an outstanding balance is several years old. Typically, you’ll have to negotiate directly with the IRS or state tax authority to obtain relief from this type of debt. The good news is that the government will likely allow you to create a payment plan that allows you to pay what you owe over several months or years.

If you are seeing relief from credit card, auto loan or other debt balances, it may be in your best interest to file for bankruptcy. Ideally, you will do so with the help of an attorney. Legal counsel may be able to explain the benefits of filing such as receiving an automatic stay of creditor collection activities.