What Kind of Debts Cannot be Discharged?

Too many debtors' chagrin, not all debts can be discharged during bankruptcy. Let's discuss some basic exceptions to the rule that bankruptcy alleviates the financial burdens of individuals.

First, if a creditor has a lien on a piece of property or other collateral, bankruptcy will not remove that lien. Indeed, secured creditors may use the bankruptcy filing as a cue to move forward with repossession or partial repossession actions. Secured creditors aren't allowed free reign here -- they are constrained by some aspects of the bankruptcy automatic stay -- and debtors may be able to file motions to stop creditors from closing on collateral. But by and large liens will remain in effect after bankruptcy is complete.

In addition, child support, palimony, alimony, and other family support payments will continue to be owed even after bankruptcy has been filed. If the debtor opts for a three to five year Chapter 13 repayment plan, the family support payments must be included with the top priority debts.

Student loans are also generally exempt from bankruptcy discharge. That said, there is a conditions, known as extreme hardship, under which student loans may be waived. However, to meet the burden of extreme hardship under the law requires truly extraordinary circumstances. For instance, one attorney who has practiced for decades reports that his only experience with extreme hardship disqualifying a student loan occurred when the debtor literally had just two years to live due to a debilitating disease.

Bankruptcy can take care of some of your tax debts, particularly if they relate to income taxes. However, other taxes owed may be far more difficult to discharge. Speak with your attorney about which tax debts may be amenable to bankruptcy relief. Other debts that may not be discharged include debts that you fail to list in your bankruptcy filing, traffic tickets, and debts incurred as a result of a drunken driving settlement.

Remember that you can't just convert secured or otherwise non-dischargeable debts to unsecured debts by paying these bills off with your credit card and then clearing your credit card through bankruptcy. The bankruptcy court will find out, and you could be punished if you take such action.