What Debt Can I Discharge?
What debt can I discharge? What property might I lose if I file for bankruptcy? Those are the two questions that potential clients most frequently ask when they first meet with us. You can discharge an unlimited amount of debt in a chapter 7 case, while in a chapter 13 bankruptcy you must have no more than certain limits of secured and unsecured debt. Those limits are regularly adjusted for inflation.
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:
- 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.
- 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.
- 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 thirty days) AND 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.
- Any debts due to creditors that are not listed in your bankruptcy schedules that are filed in the case. (There are exceptions to this but do not risk it. Notice to creditors is critical.)
- Debts incurred under false pretenses, false representations, or fraud.
- Any debt resulting from the purchase of luxury or non-essential goods and services from any single creditor over $725 within ninety days prior to filing is presumed to be non-dischargeable.
- Any debt resulting from credit card or open credit cash advances more than $1,000 within seventy days of filing for bankruptcy are presumed to be non-dischargeable.
- Any debts that are the result of a willful or malicious injury to another.
- Any debts resulting from the death or personal injury you caused while operating a motor vehicle or aircraft while intoxicated from any substance.
- Any domestic support obligations, including any spousal or child support pursuant to a separation agreement, divorce decree, or other order of a court.
- 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 from a prior bankruptcy in which you waived a discharge or were denied a discharge.
- Any payments of fines or penalties under federal election law.
- Fees imposed on a prisoner for filing a case, motion, complaint, or appeal.
- Debts for any federal crimes.
- Condominium and homeowner association fees or assessments that 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.
- Money owed due to a loan against a 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.
The law regarding “exceptions” from discharge can be very complex and difficult to navigate. The Florida bankruptcy attorneys at the Law Offices of Evan M. Rosen 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 us today at (754) 400-5150 or contact us online. Let the lawyers and staff at the Law Offices of Evan M. Rosen serve you!