In the same manner that certain assets are typically not included as part of a consumer’s chapter 7 or chapter 13 bankruptcy filing, there are also certain types of debt and financial obligations which cannot be discharged via bankruptcy. These types of debts are exempt from bankruptcy law, and you still need to pay them, whether or not you file for bankruptcy protection.

For example, one type of financial obligation that cannot be discharged via bankruptcy is child support. If you have gone through a divorce or some type of divorce or separation settlement and you are required to pay child support or child maintenance by court order, the act of filing bankruptcy will not discharge this responsibility for you to continue paying it. Child support payments are exempt from any type of bankruptcy filing that the consumer might do, whether chapter 7 or chapter 13.

Another type of financial obligation that is exempt from being discharged by bankruptcy is an IRS lien. What happens with an IRS lien is that you owe income tax payments from one or multiple years. At a certain amount of money owed, the IRS will put a lien on your house or some other type of asset that you own, or in lieu of that possibility, may garnish your wages via your employer. This type of IRS lien, in addition to being exempt from a bankruptcy discharge, is also on your credit report for about 10 years as a huge blemish, which would be in addition to the blemish on your credit report from your bankruptcy filing. These types of red flags on your credit report can make it more difficult (although not impossible) to get approved for new credit in the future.

Another type of debt that is exempt from a bankruptcy discharge is a court order that may have awarded another company or individual a specified amount of money via a lawsuit brought against you. Since judgments such as these cannot be discharged, you should know if you have any of these pending against you that you have not been paying on, because they will not be discharged via bankruptcy.

If you are significantly behind in one or more debts with your existing creditors, chances are good that in time, one or more of those creditors will file a lawsuit against you to collect that outstanding balance that you owe them. This takes time and most creditors are not anxious to go to this extreme to collect money owed to them, but it cannot be ignored since most of them, in time, WILL go to that extent. If such a lawsuit occurs BEFORE you file for bankruptcy, then that will be a court order to pay the specified amount to that creditor, and that will NOT be discharged via your bankruptcy filing, since their lawsuit occurred before you filed. The bottom line here is that you need to take some action, because you could find that filing bankruptcy is not going to do you any good at all if you have multiple creditors with a judgment against you already.

Government loans such as federal student loans are also exempt from bankruptcy discharge.

If you are considering filing bankruptcy and have thoroughly investigated all your options, you should sit down with your debts and determine how many of them would be exempt from being discharged via bankruptcy. With the recent changes in bankruptcy law, this is no longer a do it yourself project. You need to be familiar with bankruptcy law, or if you don’t have time to study up on that, the money you spend on a good bankruptcy lawyer would be money well spent.



Thanks to Jon Arnold for contributing this article to our Bankruptcy blog:

Chapter 11 Reorganization Plan

Can you answer come_on_kiss_the_gun’s question about Bankruptcy?:

I was just wondering what is the difference between Chapter 7, 10 & 13 bankruptcies. How did the new law that Bush passed now affect bankruptcies (or does it at all)? I’ve heard everything that you can’t file for Chapter 13 bankruptcy anymore to you have to take financial planning classes thereafter. Also, is it advisable at all? I know normally people say make it your last resort, but I am beyond in debt and do not have any other resolutions. Any horror stories after filing? Any positive stories? Please enlighten me.

thanks!

Chapter 7 Bankruptcy Attorney

Being so much in debt that repaying your debts becomes well nigh impossible is something that many people find them facing and which leaves them with no alternative but to file bankruptcy in order to get their financial situation back on track. However, as good as it may seem that filing bankruptcy will help you out of such financial mess, it can also lead to much confusion in your mind trying to figure out what is Chapter thirteen bankruptcy and how does it differ from chapter seven bankruptcy.

Understand What Bankruptcy Is

However, before looking at what Chapter 13 bankruptcy is, it would be necessary to first understand the meaning of bankruptcy itself. Bankruptcy is a legal process filed in a law court with the intention of eliminating debts and provides the individual or business that is filing bankruptcy with relief from having to pay off the debts, and thus can make a new start in life.

Chapter 13 bankruptcy may cost you about one hundred and eighty-five dollars to file and it is commonly also referred to as reorganization bankruptcy and such a form of bankruptcy is generally filed by persons that wish to eliminate their debts in three to five year’s time. Under Chapter 13 bankruptcy, individuals can keep part of their possessions and also have a means to finance some of their day to day expenses while at the same time still have some money left over to pay off their debts.

So, when you decide on filing Chapter 13 bankruptcy, you will need to present your petition for bankruptcy in which you need to list your schedule of liabilities and also assets. And, following the filing of Chapter 13 bankruptcy, you need to provide a plan for repayment of debts which has already been reviewed by creditor’s to see that it does indeed satisfies their requirements.

Filing Chapter 13 bankruptcy is beneficial to you if you want to hold on to some possessions including your home, and in fact, filing for this kind of bankruptcy can, under certain circumstances, prevent foreclosure and such an instance is known as automatic stay which will give you time to catch up on your outstanding debts. It is only after you still cannot meet your debt obligations in the period of reorganization that your home will be foreclosed.

As with other bankruptcies, filing Chapter 13 bankruptcy should be done through an attorney who is an expert in bankruptcies, and even though such a form of bankruptcy has its advantages, there is no denying the fact that the price you will have to pay is high, because you will have a tarnished credit standing for at least ten years, which means that the future will not look good for you if you are considering applying for credit in that time period.



Thanks to Scott Goodman for contributing this article to our Bankruptcy blog:

Chapter 7 Bankruptcy Attorney

Can you answer km10j8baker’s question about Bankruptcy?:

I have filed chapter 13 bankruptcy and I have not filed my income taxes yet. I have been told that the bankruptcy court can take your refund if you have one due to you. Is that true?

Cost Of Filing Bankruptcy

Can you answer susan s’s question about Bankruptcy?:

We are currently in chapter 13 bankruptcy it hasn’t been discharged we still have 2 years on it where can we get a personal loan for $5000.00 dollars?

Personal Bankruptcy Advice