Bankruptcy is not an undertaking for the impulsive, and most people who end up eventually filing only do so after they have exhausted all other means of financial assistance. Your bankruptcy filing could wipe out some of your debts with a single legal action, but not all of your debts. Knowing exactly how much debt relief you can expect is vital, since the impact of a bankruptcy affects your finances for years to come. Here are the three main debt categories that you may not be able to discharge with a chapter 7 filing.
1. Owing Uncle Sam
Taxes are a constant reality for everyone, and bankruptcy filers are no exception. If you owe the IRS, you already know how punishing the interest and penalties on unpaid taxes can be, and, unfortunately, you cannot expect much relief from that burden with a chapter 7 bankruptcy filing. If you have set up an installment plan with the IRS, you are expected to continue to make payments as previously agreed. The good news, however, is that if your tax debts are more than 3 years old, they have the potential to be discharged with your filing.
You should know that bankruptcy is not your only option for dealing with a tax debt. The IRS offers not only installment plans, but a program called Offer to Compromise, where you may be able to prove that paying your tax debts would cause a severe financial burden for you.
2. Student Loans
In most cases, your student loan debt cannot be forgiven through a bankruptcy filing. Both government-backed student loans and private loans are included in this provision. If you are suffering from an extreme financial situation, however, you may qualify for a student loan hardship exception. The declaration of bankruptcy is not sufficient proof of financial hardship, however and is actually unrelated. If you can show proof that continuing to make your student loan payments will place you in a severe financial situation, and you have been making a good faith effort to keep your payments up to date up until this point, you may be approved for a hardship exception.
3. Child Support
The courts (both the family courts and the bankruptcy courts) agree that protecting innocent children from the effects of divorce and the parent's financial issues is vital, so you can rest assured that a bankruptcy filing will have no effect whatsoever on your child support obligation. You must continue to pay the ordered amount and you must work to bring any back payments owed up to date. It should be noted that a chapter 7 filing will not remove any wage garnishments placed as a result of owing child support.
To learn more about debts that cannot be discharged with a bankruptcy filing, speak to an attorney like Tim George & Associates.
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