Bankruptcy can help many people in Kentucky who are in financial difficulty. A personal bankruptcy proceeding can result in the discharge of the debtor's obligation to pay many of his or her debts. However, persons who are considering bankruptcy may not realize that they may have debts that cannot be cancelled, or discharged, in a Chapter 7 bankruptcy liquidation.
The first category of debt that cannot be forgiven is debts that are not listed on the schedules submitted to the bankruptcy court at the beginning of the case. Persons may not wish to discharge a loan from a family member, for example, and such debts are commonly omitted from the bankruptcy proceeding. Student loans cannot be discharged unless denial of discharge would cause undue hardship to the student.
Many obligations owed to state, federal or local entities cannot be discharged. Recent state and federal taxes cannot be discharged. Court fees and government imposed restitution, fines and penalties also remain obligations of the debtor.
Debts involving the culpability of the debtor cannot be discharged. These debts include loans to the debtor that involved proven fraud on the part of the debtor. Debts resulting from a verdict or settlement in a case in which the debtor caused personal injury by driving while intoxicated cannot be discharged.
Perhaps the largest category of non-dischargeable debt is child support and spousal maintenance (alimony). A person cannot escape these obligations by filing a petition for bankruptcy. They remain legal obligations of the debtor after the bankruptcy proceeding is closed.
Anyone considering filing a petition for bankruptcy may wish to seek the advice of a lawyer who practices bankruptcy law regarding the dischargeability of his or her debts. Such a review can provide a useful estimate of the debtor's financial position both before and after bankruptcy.
Source: Findlaw, "Debts That Remain After a Chapter 7 Discharge," accessed on March 10, 2017