Not All Debts Can Be Discharged in Bankruptcy

Bankruptcy gives people who have accumulated too much debt a chance to start over. Often, people end up in debt because an accident or illness left them  with medical bills at the same time as it left them without the ability to work. Bankruptcy helps people to leave the cage of debt so that they can move on with their lives.

Bankruptcy often doesn’t mean losing all of your assets; debtors in bankruptcy get to keep retirement funds, personal effects, some work-related equipment and up to $390,000 in home equity (in Minnesota). However, bankruptcy does not wipe away all types of debt. Here are a few classes of debt that are difficult to remove under bankruptcy law.

Child Support and Other Family Support

Child support, alimony, family support and debts that stem from a divorce cannot be discharged in bankruptcy. In fact, the automatic stay that the court issues when you file for bankruptcy does not stop child support agencies from collecting debts or garnishing your wages.

Many Taxes

Only a few types of taxes can be discharged in bankruptcy. Specifically, income taxes which are more than three years old, and for which returns were filed at least 2 years ago, can be discharged.

Fines and Penalties

The government doesn’t want you to avoid paying a fine because you filed for bankruptcy. Fines and penalties owed to the government generally cannot be discharged.

Although these types of debts cannot be discharged in bankruptcy, the court can often direct all of your non-exempt assets towards them and wipe out your credit card and medical bills. This article is not legal advice; if you need legal advice, please contact us.