What You Cannot Discharge

Article by: Larry Young, Esquire

Title 11 of the United States Code is the Bankruptcy Code, enacted pursuant to Congress’s constitutional authority to make a uniform law respecting bankruptcy. Most people understand that the overall concept of bankruptcy is to get a discharge from debts and to get what the Bankruptcy Code refers to as a “fresh start.” Most people are also aware of what is normally dischargeable: credit cards, utility bills and medical bills, as well as mortgage and car loan deficiencies.

Most people however, are unaware of the limitations that exist on the ability to obtain a discharge. This article will discuss some of the more common limitations on consumers seeking to discharge their debts.

While § 523 of the Bankruptcy Code provides for a discharge of most debts, it lists certain exceptions, that is debts that cannot be discharged as part of a bankruptcy. The failure to have these debts discharged means that they will follow a debtor even after a bankruptcy has been concluded. So, what debts cannot be discharge?

The most important for consumers are as follows:

• Certain income tax debts if they are less than three years old.
• A debt for money or property where the debt was obtained by false representations or the use of a false financial statement.
• For certain debts incurred within 90 days of the filing of the bankruptcy. This would include the use of credit cards for expensive purchases or cash advances on credit cards.
• For debts incurred through fraud, embezzlement or larceny.
• For debts in the nature of alimony or child support. Depending upon the Chapter, this may also include debts that are for the settlement of property division in a divorce.
• For deliberately or intentionally injuring a person or their property.
• Most student loans, unless it can be proven that paying the student loans would create an “undue hardship,” a very difficult standard to prove.
• For injury or death caused while operating a car, boat or aircraft while under the influence of alcohol, drugs or “another substance.”

Prior to filing bankruptcy, individuals should examine the types of debt they have and make sure the intended “fresh start” of bankruptcy will actually be realized.