In last week's column, I discussed some common debts that could be eliminated in a bankruptcy filing. To keep it even, I'd like to talk this week about some debts that can't be discharged in bankruptcy. You are able to file bankruptcy without an attorney; however, if your desire to file is only to eliminate one of the debt types below, you could end up filing an unnecessary bankruptcy.
Here are the most common debts that cannot be eliminated in bankruptcy.
Debts that can't be eliminated
- Student loans.
- Secured debts.
- Child support and alimony.
- Ex-spouse legal fees and credit card debt.
- Car accident due to intoxication or willful and malicious intent.
- Income tax liability.
Student loans: Loans taken out for schooling may not be eliminated in the vast majority of cases. All types of education loans qualify as student loans and are exempt from elimination in bankruptcy: federal student loans, private lender student loans, loans directly from the school and tuition assistance loans directly from a school.
Exception: If the borrower can prove he or she will never be able to work again because of a total and permanent disability, he or she may be able to include the student loan in the filing. However, the standard to eliminate student loans is very high and generally not possible.
Secured debt: If you buy a vehicle, valuable jewelry or merchandise and then file bankruptcy, you will either have to surrender the item or continue to pay the lender. The lender has a security interest in the item you purchased. This means you made an agreement with the lender to pay for the item in exchange for the current use of the item. Failure to pay results in a forfeiture of your right to continue using the item.
Exception: You are allowed to surrender the vehicle, jewelry or merchandise back to the lender and wipe out your obligation to pay. You are not obligated to keep an item just because the lender has a security interest. You just cannot keep it and not pay for it.