Are There Any Reasons NOT to File Chapter 7 Bankruptcy? Part 2-You May Not Discharge All Your Debt

30 Jun Are There Any Reasons NOT to File Chapter 7 Bankruptcy? Part 2-You May Not Discharge All Your Debt

Although Chapter 7 bankruptcy usually wipes the slate clean as far as most of your debts are concerned, there are some debts that may not be discharged.

Certain debts, such as most taxes, child or spousal support, and student loans usually survive the Chapter 7 discharge. Debts incurred through fraud, may also survive the discharge. And in cases where the Chapter 7debtor has lied on his/her bankruptcy petition or meeting of creditors, or attempted to withhold assets, a creditor, the Chapter 7 Trustee, or the US Trustee could object to the entire discharge.

Sales tax, withholding tax (or if a corporation owed the tax, you are only personally liable for the “trust fund” portion) and income taxes assessed less than 3 years prior to the bankruptcy filing are not dischargeable. Property taxes are dischargeable as to you, if you are giving up the property, but if you are keeping the property they will remain on the property.

Debt obtained by false pretenses, false representation or actual fraud, and debts for fraud while acting in a fiduciary capacity, embezzlement or larceny, as well as debts due to willful and malicious injury by the Debtor to another person or their property, may be non-dischargeable if the creditor comes forward within 60 days from the meeting of creditors and objects to their debt’s dischargeability. It is presumed to be non-dischargeable if over $550 was incurred for luxury goods or services within 90 days before the Chapter 7 was filed, or if over $825 of cash advances were taken within 70 days of filing.

Debts that are omitted from the bankruptcy schedules are not discharged if it is determined to be a “no assets” case. Debts for a domestic support obligation are also not discharged, whether or not the creditor (ex) comes forward to object.

Fines owed to a government unit, student loans, debts for death or personal injury caused by unlawful operation of a vehicle while intoxicated and criminal restitution are not dischargeable.

In some cases, debtors could be denied a discharge of all of their debts. A corporation or LLC that files aChapter 7 will not receive a discharge. A debtor who transfers property with intent to hinder, delay or defraud a creditor or the trustee may lose his/her discharge. Also putting the entire discharge in jeopardy is a debtor who knowingly and fraudulently lies, makes a false claim, withholds documents, or refuses a lawful order of the bankruptcy court.

It is important to make sure that your bankruptcy lawyer is given all the information BEFORE a bankruptcy petition is filed. If there are any dischargeability issues, your bankruptcy attorney should fully discuss them with you.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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