Non-dischargeable debt, such as student loans, taxes, and alimony, cannot be eliminated through bankruptcy, but can be reduced with the help of an attorney. Chapter 7 and 13 have different rules for non-dischargeable debt, and debtors must repay student loans. Debts not listed in bankruptcy filings must still be paid, and old debts cannot be discharged in a new bankruptcy.
Non-dischargeable debt is money owed by a consumer that cannot be discharged through bankruptcy. This type of debt varies in bankruptcy court based on the filing option, whether in chapter 7 or 13. The main types of non-dischargeable debt are student loans, taxes, and alimony; Although these debts cannot be discharged, it is possible to reduce the balances through a bankruptcy attorney. Consumers should also keep in mind that debts not listed in an official bankruptcy filing will need to be paid as stipulated by the creditor.
Chapter 7 bankruptcy allows a debtor to discharge all bills that do not fall under the non-dischargeable type of debt; however, there are more non-dischargeable debt rules that apply to this filing option. In contrast, Chapter 13 bankruptcy involves creating a payment plan to creditors for all or a portion of the debt. As a result of the repayment process, less debt is considered non-dischargeable, such as back taxes.
Both bankruptcy chapters require debtors to repay student loans. The government does not want these loans stopped because needy future students will be negatively affected if the funds are lost in the bankruptcy system. Also, alimony cannot be discharged as it is a debt that has already been judged in a court of law to be directed to a former spouse. The taxes, while dischargeable under chapter 13, are non-dischargeable debts under chapter 7, so the government does not lose this supply of funds.
Some non-cancellable debts may be reduced through the assistance of an attorney. For example, certain debts, especially taxes, can be extremely large and impractical to pay off in a reasonable amount of time. In response, the court system allows reductions in some cases. The judge will decide on a reasonable amount of recovery after he or she consults with the creditor. Many government entities understand that reducing a debt can encourage consistent timely payments, rather than spending excessive money to collect a delinquent bill.
A debtor should carefully read their court documents before filing for bankruptcy. Debts not listed for discharge must be paid as indicated by creditors. Since consumers can file for bankruptcy multiple times in their lifetime, some debtors may try to discharge a debt incurred prior to a previous bankruptcy. Debtors cannot discharge old invoices in this way as the old debt is now considered non-dischargeable; the court will see this discrepancy, which may negatively affect the current bankruptcy process.
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