The Rules and Barriers to Nondischargeable Debts in Chapter 7 Bankruptcy

Published on October 4, 2012 by Jeffrey Judge

When filing for Chapter 7 bankruptcy there are some debts that will be found nondischargeable, which basically means that they are not completely gone in Chapter 7 bankruptcy. Here are the basic debts covered that will not be discharged and should be noted when filing for Chapter 7 Bankruptcy.

 

Grounds for Denial of a Chapter 7 Discharge

There is a code for Chapter 7 which is the only way debtors can receive a discharge and it is through the provisions of the Bankruptcy Code. Through this code, there are lists of reasons why the court may deny a discharge for Chapter 7 which is listed in Section 727(a).  These rules are important, and if the debtor does not follow rules that pertain to the entire Chapter 7 discharge, then any of the following may object the entire discharge: the U.S. trustee, a creditor or the bankruptcy trustee. Chapter 7 discharges can be denied if the court agrees, which would result in the possibility of none of your debts being discharged.

 

Barriers to Discharge

There are several barriers to discharging your debts. The court may dismiss your case entirely if you do not follow the appropriate procedures and court rules.  In that case, none of your debts will be discharges, and creditors can restart the collection process. The filing requirements include:  1) Copies of the last two years of Tax Returns or Transcripts; 2) Proof of Credit Counseling Class within 180 days before filing; 3) Proof of a Financial Management course after filing; 4) Petition, with Schedules A through J, and Statement of Financial Affairs; 5) Statement of Intent regarding Secured Property and Unexpired Leases; 6) Statement of Social Security Number; 7) Copies of all Paystubs 60 days prior to filing; and  8) Notice of Individual Debtor (11 U.S.C. §342(b),   Further, you there are strict time frames on how often you can file for bankruptcy protection which must be followed.  Finally, any unusual property transfers, failure to fully disclose to the court, or failure to account for lost assets can result in the court dismissing your case and denying a discharge of any of your debts.

In addition, the Bankruptcy Code lists several types of debts that are presumed to be Nondischargeable.  These debts were determined by Congress as not dischargeable for public policy reasons, which are all based on the character of the debt, unless unexpected situations happen. As a result, we elude that when you get your general discharge, after the end of your case, the process for collection of that specific debt can continue by the creditor. Debts presumed to be nondischargeable are: 1) Taxes, 2) Domestic Support Orders (child support and alimony), 3) Student Loans; 4) Government Debts and Court Fines and Restitution; 5) Drunk Driving related debts (personal injuries); and 6) Homeowner Association fees.

Creditors always have the right to object to their debt being discharged.  However the courts require that some kind of abuse has occurred before they will make that finding.  These type of abuses include: credit card purchases or cash advances within 90 days of filing bankruptcy; 2) any credit obtained by fraud or false pretense; or 3) willful and malicious actions that  injure a person or destroy property. In those cases, the creditor can successfully challenge the discharge of their specific debt.   If a creditor doesn't raise a successful objection within certain time limits then that debt will be discharged normally.

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