Once your bankruptcy is discharged, all those bills that have been piling up for months will be gone, right?
While unsecured debts like medical bills, personal loans and credit card charges are likely to disappear, some obligations, referred to as nondischargeable debts, will not.
Which debts will you still owe after your bankruptcy is discharged? The answer depends on the bankruptcy laws and your individual circumstances.
Bankruptcy Won’t Erase Newly Incurred Debts
Let’s say that one of the debts included in your bankruptcy petition is a hefty, overdue credit card bill. Assuming that the bill will be discharged, you continue making charges until the card is canceled.
This is one way to ensure the debt — or at least part of it — will NOT be discharged.
Any charges made after the date you filed for bankruptcy will not vanish with your discharge. Likewise, any other new debts that you incur while your case is pending will not be erased.
Bankruptcy Won’t Eliminate Priority Debts or Student Loans
The U.S. Bankruptcy code grants priority status to some types of unsecured debt. In most cases, these debts are automatically excluded from discharge. And if you have any assets to distribute among creditors, priority unsecured debts will get paid first.
So, what are these debts?
Money owed for child or spousal support will not be wiped out with bankruptcy discharge, as it is considered necessary to meet the basic requirements of living.
In addition, debts owed to the government are rarely dischargeable. That means your back taxes for the last three years will probably not go away when you file for bankruptcy. If the tax returns were filed on time and are more than three years old, they are dischargeable. And if you owe criminal fines, penalties or restitution for overpayment of government benefits, you’ll still have to pay.
Student loans are not priority unsecured debts, but they are treated much the same in bankruptcy. Unless you can demonstrate an undue hardship, such as a disability that prevents you from working, your student loans will not be discharged.
Secured Debts After Bankruptcy
When filing for bankruptcy, you have two options in regards to secured debts, or items that you have financed. Typically, these include cars and your residence.
You could include the debt in your petition, but if you do, you’ll have to give the property back. If you want to keep the property — if you want to continue living in your home or driving your car, for example — you could reaffirm the debt.
Instead of eliminating the debt, you’ll be entering into a new contract agreement with the creditor. You are obligated to pay reaffirmed debts after bankruptcy. If you fail to make your agreed-upon payments, the creditor has the right to repossess or foreclose on the property and to sue for money owed.
Every case is different and the debts you may owe after your discharge can vary. Consult with the experienced attorneys at Lewis Adams & Associates to learn more. Call our West Jordan, Utah, office today to discuss your Utah bankruptcy case.