Personal Bankruptcy Won't Clear Away All Debts

Personal bankruptcy can be a way to get out from under a crushing debt burden from things like personal loans or credit card debt. Many are surprised to learn, however, that even after a bankruptcy they may still be in debt. This is because personal bankruptcy does not eliminate all kinds of debt.

Debts Owed the Government

Not surprisingly, debts owed to the federal, state, or municipal government are not cleared away by bankruptcy. If you owe back taxes - including fees and penalties associated with non-payment of taxes - you will still have to pay those after a bankruptcy. Also fines or restitution payments levied as a result of a criminal conviction are not discharged by a bankruptcy filing. This includes traffic tickets and judgements for damages as a result of negligence.

Student loans are also often not eliminated by bankruptcy. The law requires student loans to be paid even after bankruptcy. The exception is if the loan places "undue burden" on the borrower. What exactly constitutes an undue burden is up to the bankruptcy court to decide, which makes the assistance of an experienced bankruptcy attorney critical.

Divorce

After bankruptcy you are still required to pay alimony and child support payments. Even back-due child support must be paid in full. You can, however, restructure any owed child support through the bankruptcy proceedings to arrive at a convenient payment plan.

Some obligations to an ex-spouse can be discharged through bankruptcy. For example, money owed in exchange for a share of personal property, such as a home. On the other hand, some debts incurred during marriage may not be eliminated during bankruptcy if they were assigned to you by the divorce proceeding.

An Attorney Can Help

Personal bankruptcy law is complex. Contact us to learn how the law applies to your unique case.

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