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Bankruptcy Attorneys

What debts can I discharge?

The two most common questions potential clients initially ask are what debts they can discharge? and what property might they lose if they file for bankruptcy? The amount of debt you can discharge in a chapter 7 case is unlimited. However, in a chapter 13 bankruptcy, you must have less than $360,475 of unsecured debt and $1,081,400 of secured debt.

Beyond that, all unsecured debts can be discharged in bankruptcy except for the debts listed below:

Most Taxes and customs duties – Especially those taxes in which a tax lien has been filed as it is then a secured debt. However, income taxes are dischargeable if all of the following are true:
1. Three year rule – The tax year in question is over three years preceding the filing date of the bankruptcy. The three-year period is computed from most recent date the tax return is due for the tax year (typically April 15 of the year following the taxable year). An extension to file the return extends the start date of the period.
2. Two year rule - You have filed a return for the tax year(s) in question at least more than two years preceding the filing date of the bankruptcy.
3. 240 day rule – The tax claim was assessed at least more than 240 days preceding the filing date of the bankruptcy (plus any period of over-lapping time during which an offer in compromise was pending, plus 30 days). AND
4. The tax return in question was not fraudulent and you have not engaged in activity deemed to be a willful attempt to defeat or evade the tax.
Debts incurred under false pretenses, false representations, or fraud.
Debt resulting from any credit card or open credit cash advances for more than $875 within 70 days of filing for bankruptcy is presumed to be non-dischargeable.
Any debt resulting from the purchase of luxury or non-essential goods and services from any single creditor over $600 within 90 days prior to filing is presumed to be non-dischargeable.
Any debts due to creditors that are not listed in your bankruptcy schedules that are filed in the case.
Any domestic support obligations, including any spousal or child support pursuant to a separation agreement, divorce decree or other order of a court.
Any debts which are the result of a willful or malicious injury to another.
Any government fines, penalties or forfeitures imposed for any transaction or event within the three years preceding the filing.
Student loans unless you can prove paying them would be an “undue hardship.” This is very difficult to demonstrate.
Any debts resulting from the death or personal injury you caused while operating a motor vehicle or aircraft while intoxicated from any substance.
Any debts from a prior bankruptcy in which you waived a discharge or were denied a discharge.
Debts for any federal crimes.
Any payments of fines or penalties under Federal election law.
Condominium and homeowner association fees or assessments which become due and payable after you file for bankruptcy for as long as you have a legal, equitable or possessory ownership interest in the unit.
Fees imposed on a prisoner for filing a case, motion, complaint or appeal.
Money owed due to a loan against pension, profit-sharing or stock bonus.
Many credit unions “cross-collateralize” loans, which means that a credit card account may be secured by other property such as your automobiles. Therefore, those accounts cannot be discharged. Also, your credit union loan may be secured by funds in your credit union accounts, and in such event, the credit union can seize money in these accounts to pay the loan prior to the filing of the bankruptcy petition. Most credit unions will make you close your pension, checking and savings accounts if you discharge a loan or credit card debt from the same credit union. In such event, you will have to open new checking and savings accounts at a different financial institution. You should examine your loan documents or talk to your credit union if you are unsure whether or not your credit union loan is secured by money in the accounts.

“Exceptions” from discharge can be a very complicated matter. Rosen & Rosen, P.A. will gladly assist and advise you every step of the way on these issues. If you or someone you know is considering filing for bankruptcy, call or contact our bankruptcy lawyers today. Let the lawyers at Rosen & Rosen, P.A. serve you.

We are a debt relief agency. In addition to other legal services, we help clients file for bankruptcy relief under the Bankruptcy Code.