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Debts you cannot discharge in bankruptcy

by Dorota Trzeciecka on March 17th, 2011

When you are deciding if bankruptcy is right for you, it is important to know what debts you cannot discharge in bankruptcy.   Why is it important?  Because, why go through bankruptcy, if you end up with the same debts that had been causing you the financial burden?  That would defeat the reason for which bankruptcy had been designed — to give you a fresh start.

For the purpose of bankruptcy, non-dischargeable debts can be broken down into three categories.  Number one are debts that will not be discharged under any circumstances.  Debts belonging to this category include, among others, alimony and child support, fines and restitution imposed by state, federal or local governments, and certain tax debts.  Number two are debts that will not be discharged unless you can show an undue hardship, as in the case of student loans.   Undue hardship in case of student loans means that, there is no hope now, or any time in the future, that you will ever be able to repay these loans — the burden that is very difficult to overcome.   And finally, number three are debts that can generally be discharged in bankruptcy, but which may not be discharged if the creditor successfully objects.   Debts belonging to this last category include any debts exceeding $500 in total, to a single creditor, that you run up within 90 days leading up to filing bankruptcy, as well as cash advances on your credit cards totaling more than $750 and taken out by you within 70 days of filing bankruptcy .  To be successful in its objection, the creditor must file a Complaint to Determine Dischargeability, and show that you incurred the debt for your personal, family, or household use, and that such debt was not necessary for support or maintenance of you or your family.   The dischargeability action may prove expensive for you to defend in the long run, because it will result in an increase of your attorneys’ fees.

So, if you are thinking about going on one last shopping spree before filing bankruptcy, or getting some extra cash, think again, and put away those credit cards.