Understanding debts that can or cannot be discharged in a bankruptcy

Understanding which types of debts can and cannot be written off in a bankruptcy is indeed a key consideration when deciding whether or not to file for bankruptcy with the help of a bankruptcy solicitor. This article lists some of the debts that can and cannot be wiped out even after you have filed for bankruptcy.

Debts that can't be discharged

Bankruptcy doesn't free you from the following obligations:

  • Any debts you incurred since you filed for bankruptcy
  • Despite the fact that a debtor isn't personally responsible for wiped out debts, a valid lien placed against property, whether private property or real estate, that hasn't been exempted in some way in the bankruptcy case still remains active. These type of debts are referred to as secured debts, given that the debt itself is secured using property interest. Thus, a secured creditor can impose the lien to take up the property secured through the lien, although the personal responsibility to pay the debt has been wiped out.
  • Debts traced from breaching bonds or court fines
  • Child support or alimony awards
  • Student loans
  • A sum payable under a proceeds of criminal law
  • Interest amassing on a debt that's covered by insolvency for a timeline beginning on or after the bankruptcy date.
  • Unliquidated lawsuits against a bankrupt individual not arising from contravention of contract. For example, claims arising from an auto mishap in which the bankrupt was partly or wholly at fault. The circumstance arising from the claim should have happened before the bankruptcy filing with the lawsuit remaining unsettled at the day of bankruptcy. Consequently, debtors should always finalize this kind of matter prior to becoming bankrupt.

Debts that can be discharged?

Despite the fact that not all debts can be wiped out, a lion's share of a person's debts may be wiped out. Notably, this applies only to debts that accrued prior to the date of filing for bankruptcy. Again, any fraud or misconduct in relation to the below categories can affect whether the debts can be wiped out or not.

  • Credit card charges including both outstanding and late fees
  • Collection agency accounts
  • Personal loans from employers, friends and family
  • Dishonored checks
  • Outstanding utility bills
  • Medical bills
  • Personally guaranteed business loans
  • Money owed under tenancy agreements
  • Civil court rulings unless based on scam

For more information and details about filing for bankruptcy, talk with bankruptcy solicitors in your area who can walk you through the process.