Most people in Indiana view bankruptcy as a means for discharging their obligations to creditors and escaping what may be a suffocating mountain of debt. Unfortunately, not all debts can be discharged in bankruptcy. An understanding of the most common nondischargeable debts may be an important consideration before deciding to file a bankruptcy petition.
Nondischargeable debts
The entire list of nondischargeable debts is set forth in Section 523 of the United States Bankruptcy Code. The list begins with an enumeration of various tax debts that cannot be discharged. Among these are taxes for which the debtor is liable in any capacity. Other taxes that are not dischargeable are taxes for which no return was filed. Any debt obtained by fraud or misrepresentation cannot be discharged.
Perhaps the most important exclusion from the list of dischargeable debts is any domestic support obligation. Any obligation for damages for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel or aircraft while the debtor was intoxicated. Another important exclusion item on the list of nondischargeable debts is consumer debt owed to a single creditor in excess of $500. An extension of consumer debt under an open-ended finance plan in excess of $750 is also nondischargeable. Section 523 lists other debts that cannot be discharged, but most of these obligations are very uncommon.
Relief from the court
Educational loans are also listed as nondischargeable, but the politics of the moment may change this. Many people have borrowed money to finance their educations only to discover that the burden of repaying the loans cannot be met. The bankruptcy code permits the court to grant relief to a debtor by making the loans dischargeable if the debtor can demonstrate that repayment would impose an undue hardship on the debtor and the debtor’s dependents.
The issue of whether a specific debt is dischargeable should be reviewed with an experienced bankruptcy attorney. A knowledgeable lawyer can provide useful advice on whether a debt can be discharge and whether the court is likely to grant hardship relief.
