Bankruptcy is a powerful and effective legal tool that can help people eliminate their debt and restart their financial life. While it can often protect assets and discharge costly payments, it does have limitations. Certain types of debt cannot be removed through bankruptcy. Here, we discuss these types of debt and how they can be addressed.
Certain Types of Debt Cannot Be Eliminated in Bankruptcy
In most bankruptcies, most of the debt is discharged or erased. You do not have to pay this debt, and creditors cannot seek payment from you. This is true for many types of debt, including credit card debt.
There are, however, some kinds of debt that are difficult or even impossible to discharge. The federal Bankruptcy Code lists 19 categories of this type of debt. The government has determined that these obligations must be paid typically based on the nature of the debt or because the debt was incurred as a punishment. The most common of these debts include:
- Child and spousal support. An obligation to a former spouse or your children cannot be addressed by a bankruptcy. You will need to pay what you owe at the end of the process.
- Student loans. Student loans are very difficult to discharge except in extreme circumstances. Additionally, all types of educational loans are included in this category, including government and private loans and tuition assistance directly from a university.
- Taxes. Like student loans, it is difficult but not impossible to eliminate tax debt. There are strict rules and deadlines that must be met to obtain a discharge, and not everyone may be eligible.
- Restitution or personal injury. If you were involved in a DUI accident or other court case that results in restitution or payment to a victim, you must pay. When your careless action hurts another, you are obligated to pay that debt.
Even when some of your debt cannot be discharged through bankruptcy, filing for Chapter 13 or Chapter 7 can help you address your debt and help you make the debt that remains manageable. Consolidation and other repayment options can be arranged.
If you or someone you love is struggling under the weight of their financial obligations, help is available. Contact the experienced attorneys at Chesterfield Bankruptcy Law today to learn more about your options in Virginia and to schedule a free, no-obligation consultation.