Non-Dischargeable Debts

A non-dischargeable debt is an obligation that is not eliminated by the bankruptcy discharge. The debtor generally remains legally responsible for the debt after the bankruptcy case.

No. Federal bankruptcy law excepts several categories of debt from discharge. The applicable exceptions depend on the bankruptcy chapter, the nature of the debt and whether a creditor must obtain a court determination.

Common examples include domestic support obligations, many student loans, certain taxes, criminal fines and restitution, some fraud-related debts, debts for willful and malicious injury and intoxicated-driving injury obligations.

Not always. A completed Chapter 13 plan may provide a somewhat broader discharge than Chapter 7, although many important obligations remain non-dischargeable in both chapters.

Some older income tax obligations may qualify for discharge when detailed timing, return-filing and fraud requirements are satisfied. Recent taxes, trust-fund taxes, fraudulent returns and taxes willfully evaded are generally treated differently.

Not necessarily. Bankruptcy may eliminate personal liability for a qualifying tax debt without automatically removing a valid tax lien from property.

Student loans are generally not discharged through the ordinary bankruptcy process. A debtor usually must file a separate adversary proceeding and establish the applicable undue-hardship standard.

No. Child support is a domestic support obligation and is generally not dischargeable in Chapter 7 or Chapter 13 bankruptcy.

Alimony and maintenance obligations that qualify as domestic support obligations are generally not dischargeable.

A non-support divorce obligation owed to a spouse, former spouse or child is generally not dischargeable in Chapter 7. Treatment may differ after successful completion of a Chapter 13 plan.

A debt obtained through false pretenses, false representation or actual fraud may be excepted from discharge. The creditor generally must file a timely adversary proceeding and prove the required elements.

An adversary proceeding is a lawsuit filed within the bankruptcy case. A creditor may use it to ask the court to determine that a particular debt is non-dischargeable.

Debts arising from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny may be excepted from discharge after the required bankruptcy-court proceeding.

A debt for willful and malicious injury to another person or property may be non-dischargeable. The result depends on the bankruptcy chapter and the court’s findings.

Many criminal fines, penalties and restitution obligations are not dischargeable in bankruptcy.

A debt for death or personal injury caused by operating a motor vehicle, vessel or aircraft while unlawfully intoxicated is generally not dischargeable.

The treatment of an omitted debt depends on the bankruptcy chapter, whether assets were available, whether the creditor had notice and whether the creditor lost the opportunity to protect its rights. Every known creditor should be listed.

Pre-filing association debt may be treated differently from fees that arise after filing. Post-filing condominium, cooperative or homeowners association fees may remain the debtor’s responsibility while the debtor or trustee retains a qualifying ownership interest.

The debtor remains responsible for the debt. After the bankruptcy stay and other protections end, the creditor may resume lawful collection activity, including payment demands, lawsuits and garnishment.

Priority debts such as domestic support obligations and certain taxes generally must receive the treatment required by bankruptcy law in the Chapter 13 plan. Other surviving debts may remain payable after plan completion.

The automatic stay generally restricts collection while the bankruptcy case is pending, even when the debt may ultimately survive discharge. Exceptions and court-authorized relief may apply.

Possibly. Depending on the creditor and type of debt, the debtor may seek a payment arrangement, administrative repayment program or negotiated settlement after bankruptcy.

Yes. A court may determine that only part of an obligation falls within an exception to discharge, depending on the facts and applicable law.

Dischargeability depends on the debt’s origin, dates, documentation, bankruptcy chapter, creditor notice and whether litigation is required. A bankruptcy attorney can review the debt before filing.

Ferguson & Ferguson can classify debts, compare Chapter 7 and Chapter 13 treatment, evaluate tax and student loan issues, review domestic support and divorce obligations, and advise clients concerning creditor objections and adversary proceedings. Call the Huntsville office at 256-534-3435 or the Decatur office at 256-350-7200 to schedule a free consultation.