It's extremely important to know which of your debts are actually dischargeable -- that is, eligible to be erased -- before you file for bankruptcy. All too often, Californians who file for bankruptcy without help from Southern California bankruptcy attorneys find that their debts aren't covered by their filing. If it can't be fixed, this could substantially damage their credit for the next decade without much actual benefit.
To some extent, which debts are dischargeable depends on your circumstances, but some debts are never or almost never dischargeable. Even then, this still depends on which type of bankruptcy you choose. Remember, most consumers will file for either Chapter 7 bankruptcy, which is liquidation, or Chapter 13, reorganization. Chapter 13 is best for people with an income and/or substantial property to protect, while Chapter 7 is best for non-homeowners with a large amount of debt not tied to any collateral.
Under Chapter 7, you can never or almost never convince a court to forgive these kinds of debt:
- Court-ordered payments, which includes child support, spousal support and any judgment from a lawsuit against you.
- Federal and state income taxes due for the past three years.
- Criminal fines (including DUI cases) and court-ordered repayments.
- Any debt created by fraud on your part. For example, if you lied on a loan application, that debt isn't dischargeable. This also covers debts you ran up right before you filed for bankruptcy.
- Federal student loans that have been in repayment status for less than seven years.
- Any dischargeable debt that you used to pay off non-dischargeable debt.
It's also very important to realize that any debt you didn't list on your bankruptcy petition is non-dischargeable. Even if you made an honest mistake, that debt is excluded from your bankruptcy case.
Things are a little different in Chapter 13, which takes longer than Chapter 7 but allows many more debts to be discharged. Chapter 13 debtors still may not discharge debts from:
- Child support, jury verdicts and other legal judgments
- Fines related to criminal cases
- Federal student loans
- Taxes for which no return was filed
However, they can discharge at least part of their tax debt, as well as debt for things like employee wages, which wouldn't be dischargeable under Chapter 7. More importantly, a Chapter 13 filing allows filers to hang on to property that they might have to give up under Chapter 7, such as heirloom jewelry.
This is just the beginning of the story. For a more complete understanding of your situation, experts recommend that you talk to an experienced Orange County bankruptcy lawyer. At Howard Law, we specialize in helping individuals and families that need help understanding all of their debt relief options, including bankruptcy. We offer free consultations to potential clients, so there's no risk in speaking to us about your case. To set up a free consultation, please contact us today or call toll-free at 1-800-872-5925.