There are some debts you cannot discharge in
bankruptcy. In general, student loans, domestic support obligations, fraudulently incurred debts, and certain credit card cash advances cannot be discharged in bankruptcy. These categories of debt are listed in
Section 523 of the bankruptcy code which excepts certain debts from discharge. In contrast to
Section 727 which denies the debtor a discharge entirely for certain bad acts, Section 523 only excepts specific debts from discharge. For instance, if a debtor files for
chapter 7 bankruptcy and is found to have hindered, delayed, or defrauded a creditor as prohibited by Section 727 of the Bankruptcy Code, the debtor may be denied a discharge entirely; the debtor's credit card debt, medical debt, and any other debts will not be eliminated. However, if the debtor only incurred a particular debt under false pretenses, Section 523 of the bankruptcy code will except that particular debt from discharge, but the debtor will still receive a discharge of their credit card debt, medical debt, and other dischargeable debts. Hence,
nondischargeable debt in bankruptcy is not the same as a
denial of discharge in bankruptcy.
The Debts You (Generally) Cannot Discharge in Bankruptcy
Recent
income tax debt is not dischargeable in bankruptcy. However, if your income tax debt is more than 3 years old you may be able to discharge it in bankruptcy. Watch this slide to learn more.
Student loans are very difficult to discharge in
bankruptcy. Unless you can satisfy the undue hardship exception you will not be able to discharge your
student loans in bankruptcy. To satisfy the undue hardship exception & discharge your student loans you will have to prove 3 things: (1) based upon your current income and expenses you cannot maintain a minimal standard of living; (2) your state of affairs is likely to continue for a significant portion of the repayment period; & (3) you have made a good faith effort to repay your student loans. This test is extremely difficult to pass; therefore, you generally cannot
discharge student loans in bankruptcy.
Domestic support obligations are also nondischargeable in chapter 7 and chapter 13 bankruptcy. The definition of domestic support is very broad, but the typical fact pattern involves a debt owed to a former spouse or child of the debtor in the nature of alimony, maintenance, or support established by a separation agreement, divorce decree, property settlement agreement, or court order. While
domestic support obligations are nondischargeable in chapter 7 bankruptcy and chapter 13 bankruptcy,
non-support debts may be discharged in chapter 13 bankruptcy upon full completion of the chapter 13 plan. In determining whether a debt is in the nature of support the court will evaluate the parties' intent and the spouse's need for support at the time of separation.
Debts incurred by false representations & actual fraud are excepted from discharge in bankruptcy. If the debtor makes a false representation to obtain credit and the creditor justifiably relied upon the representation, the debt is excepted from discharge under
Section 523(a)(2)(A) of the Bankruptcy Code.'
Debts in the amount of $600 or more for
luxury goods and services incurred within 90 days before bankruptcy are excepted from discharge.
Luxury good and services in bankruptcy are extravagant and self-indulgent. For instance, a $600 salon appointment is likely extravagant and will probably qualify as a luxury service in bankruptcy. However, this presumption of nondischargeability only applies if the debt was incurred within the 90 days preceding the bankruptcy filing. If the debtor waits more than 90 days to file after incurring the debt the presumption of nondischargeability will not apply.
