Bankruptcy remedies your financial stress by eliminating, reducing or restructuring your debt through the discharge. Some debts are never discharged, some are discharged if you prove you are an honest debtor, and some are discharged only when you prove that if the court makes an exception for that debt (“excepting the debt from your discharge”) an undue financial hardship is created.
Child support is not discharged however, if the amount of a child support wage garnishment is too large for your monthly budget and does not allow a minimal standard of living; a chapter 13 can reduce the amount of the monthly garnishment for up to five years. Your chapter 13 must be in good faith. Child Support Services must agree, in writing, to the reduced monthly payment. The balance of their unpaid Child Support debt is collectable when the chapter 13 ends. You may file as many Chapter 13 cases as you need to pay the debt.
Taxes and other debts to Government Units are examined by type and length of time due, to see if they are excepted, reduced or discharged. Discharge depends on the type of debt, when the debt became due, and when you file your bankruptcy petition. Income taxes, property taxes, employment taxes, business taxes, criminal restitution orders, traffic fines are all examples of this type of debt. If you have tax debt and review your tax transcripts you can determine when to file your case to discharge the largest amount or all of your tax and other debt to Government Units.
Consumer debts owed to a single creditor aggregating more than $675 for purchases for luxury goods or services, like travel or jewelry, within 90 days of your petition date; and cash advances within 70 days of your petition date, are presumed excepted from discharge. View your creditor statements to determine if you owe a single creditor more than $675 for a luxury good or service purchased in the last 90 days. Check to see if any transactions were classified under ‘cash advance’ categories on your statement within the last 70 days. You may need to wait a little longer to file your petition to discharge these debts.
Creditors can file an adversary action to ask the Court to except your debt to them from the discharge order. The creditor will offer evidence to prove to the court that you are not an ‘honest debtor’. If the creditor can show that you made false statements to obtain a debt, provided false written financial statements, or acted in a willful or malicious manner then the Creditors debt is excepted from your discharge and you must make room in your ‘fresh start budget’ to pay this debt.
Student loans are not discharged unless you can prove that payment creates an undue hardship for you. You must show that you cannot afford a minimum standard of living if you pay the loan; you made a good faith attempt to pay your loans before you filed bankruptcy; and you will not be able to pay the loans in the future. If you have a high amount and various types of student loans it may be a good financial decision to ask the Court to discharge or reduce your loan amounts through an adversary action. The Student Loan lenders ask for an extensive amount of discovery. If you are handling on your own, you will need to learn how to use the correct forms and follow the bankruptcy trial rules. If you are retaining counsel, be prepared to pay your counsel for the time involved.
HOA fees incurred after you file your petition are not included in your discharge even if you surrender the real property to the lender. Most owners file bankruptcy and move from their condominium to allow the lender to take possession. You are liable for the post petition monthly HOA bills until the lender gets around to taking possession; often the lenders are slow to take possession. Stay in your condominium, pay the monthly HOA dues until a secured lender or the HOA forecloses or takes possession of the property. The mortgage amounts you are not paying the lender can pay your costs to move and more. Lenders will sometimes provide a ‘moving allowance’ once they have taken possession. The pre petition HOA fees are discharged.
Loans from a pension, profit-sharing, stock bonus or other plans are not discharged. You must continue to pay these loans.
Violations of Federal Securities Laws are very serious matters and not discharged.