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What debts can be discharged in bankruptcy?

There are several types of bankruptcy under the Bankruptcy Code, and each has different laws that regulate which types of debts can be discharged in bankruptcy. Chapter 7 bankruptcy allows many types of debts, primarily unsecured debts, to be discharged. An unsecured debt or loan, such as credit card debt, is not tied to physical property just as a mortgage is connected via a lien to a house or other form of real property. Some debts, however, are non dischargeable.

Debts that can be discharged, with some exceptions, include:

  • Credit card debts
    • The Bankruptcy Court does not discharge debts resulting from luxury item purchases or services paid for ninety (90) days prior to the discharge or cash advances of $750 or more seventy (70) days prior to filing the bankruptcy petition.
    • Credit card debts include late fees charged by the card issuing bank.

The law says:

“discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt…

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;

(C) (i) for purposes of subparagraph (A) (I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and (II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable

(ii) for purposes of this subparagraph and (II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor Section 11 U.S.C. 523

  • Medical bills
  • Auto loans
  • Money/lawsuit judgments
    • One cannot wipe out child support or other “domestic support obligations” (alimony) arrears in a bankruptcy. 11 U.S.C. 523(a)(3)(B)(5)
  • Most personal loans
  • Collection agency fees
  • Past due utility bills
    • It is important to discuss how including utility bills in your bankruptcy petition may affect your current utility services.
  • Student loans
    • Student loans are very, rarely discharged. Speak to Mr. Lutzky is a student loan has specifically created an extreme and undue hardship on your life.

The law says:

“discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt (8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for (A) (i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or (B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual” (11 U.S.C. 523)

  • Automobile accident claims.
    • If an automobile, vessel or aircraft claim against you involves drunken operation of the vehicle, then the claim is not dischargeable.

The law says: A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance 11 U.S.C. 523

  • Government benefits overpayments including veterans loans and overpayments
    • Restitution ordered in a criminal case cannot be discharged in
  • Most tax payments cannot be wiped out in a bankruptcy

The law says:

“A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt (1) for a tax or a customs duty (A) of the kind and for the periods specified in section 507 (a)(3) or 507 (a)(8) of this title, whether or not a claim for such tax was filed or allowed; (B) with respect to which a return, or equivalent report or notice, if required (i) was not filed or given; or (ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax” (11 U.S.C. 523)

If you owe money on a loan but made a material misstatement on the loan, then you may not discharge that loan if that misstatement allowed you to get that loan. If you overstate your income in writing on a loan or application for credit and you are awarded that loan or line of credit and then you want to have what is due from that account discharged in bankruptcy, you cannot discharge this money due to fraudulent statements.

The law says:

“A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition; (B) use of a statement in writing (i) that is materially false; (ii) respecting the debtor’s or an insider’s financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive” 11 U.S.C. 523

If you are considering filing for bankruptcy, then you should contact an experienced attorney. Jayson Lutzky is a Bronx, New York lawyer with over 34 years of experience practicing law. He offers free in-office consultations to help potential clients understand their options if they are considering filing for personal bankruptcy. Call 718-329-9500 to schedule a confidential appointment. Visit www.MyNewYorkCityLawyer.com to learn more about Mr. Lutzky and to request assistance.