The main goal of a debtor in a Chapter 7 Bankruptcy proceeding is to be relived of all personal liability by receiving a discharge at the completion of their case. The term discharged is used to describe a debtor that is forgiven of legal obligations to pay his debts. However, not all debts are dischargeable. That is, even if the debtor receives a discharge, the bankruptcy filing will not relieve the debtor of personal liability of such a claim. The creditor will still attempt to collect from the debtor by sending notices, filing judgment liens, garnishing wages, and taking whatever necessary action available to get their money. Below is the five common types of debts you will still owe after filing for Chapter 7 Bankruptcy:
1. Tax Debts
As a practical matter, federal, state, local, sales tax, and payroll taxes are not dischargeable in a Chapter 7 Bankruptcy. However, federal or state income taxes that were due at least 3 years before the debtor filed for bankruptcy may be discharged. Although the debtor may be discharged of his personal obligations to pay income tax on the state or federal level, any tax liens incurred on the debtor’s property will remain.
2. Child Support Obligations
Child support obligations are taken very seriously by bankruptcy laws and are thus, not dischargeable. Any arrears or missing child support payments are not forgiven, and the debtor must continue to make any payments as they come due while his bankruptcy case is pending.
3. Student Loans
Student loans that were made, insured, or guaranteed by a governmental unit or made under a governmental funded program are not discharged in a Chapter 7 bankruptcy proceeding. However, in very narrow circumstances, a discharge may be possible if the debtor is able to show an extreme hardship on the debtor and the debtor’s dependents if the loan is not discharged.
4. Omitted Creditors
Any creditor not listed in the debtor’s schedules when he files for bankruptcy will not be discharged! If the debtor fails to list a creditor on his schedules so that the creditor does not receive notice of the bankruptcy filing, then that claim will be non dischargeable and the creditor can still collect during the bankruptcy proceeding and after. However, if the creditor has actual knowledge of the bankruptcy, despite lack of notice, the unlisted debt will be discharged.
5. Fraud
A debtor will be denied a discharge if, with the intent of filing for bankruptcy, the debtor maxes out his credit cards and withdraw cash advances to purchase luxury goods or services. If the debtor can show that the money has been used to purchase necessities, such as food, make rent payments, and/or pay utility bills, the debt may be dischargeable.
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