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What kinds of debt are restricted from personal bankruptcy?

Readers in the Escondido area who are considering bankruptcy will want to know exactly what kinds of debt can be eliminated through a bankruptcy filing. To that end, it is important for California residents to be aware of the types of debt they have and what options are available for a fresh start.

Though there are exceptions, in the majority of cases, the following kinds of debt are not allowed to be discharged through bankruptcy:

• Secured debt

• Student loans

• Alimony or child support

• Restitution

• Car accidents caused by the use of illegal substances

• Car accidents caused by malicious intent

• Income tax debt

• Ex-spouse credit card debts or legal fees

While the above kinds of debt are usually ineligible for discharge under a bankruptcy filing, there are some exceptions. For instance, secured debt can be eliminated if a debtor surrenders the item to which the secured interest is attached. That item could be a car, jewelry or some other kind of merchandise.

As for student loan debt, the debt can sometimes be discharged if the borrower can show that he or she has suffered a total disability that permanently prevents employment. However, proving permanent disability can be difficult, given the current standards for eliminating student loans.

Additionally, individuals may discharge some income tax liability if very specific criteria are met. Generally, an experienced legal professional is needed to help file for bankruptcy that discharges income tax liability.

While some debts may not be eliminated through personal bankruptcy, there are still ways of eliminating many other kinds of debt. For example, Chapter 7 bankruptcy provides debt relief to many San Diego and Escondido residents who are experiencing hard times. Chapter 7 can help end creditor harassment and eliminate unsecured debt. There are some exceptions to Chapter 7 filings and eligibility, so it likely best to seek advice from a legal professional who can accurately assess your specific bankruptcy needs.

Source: Fox Business, "Debts That Can't Be Wiped Out in Bankruptcy," Justin Harelik, Jan. 31, 2012

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