Individuals Families and
Small Business Owners
Debtors seeking to achieve relief from overwhelming financial debt may file for Chapter 7 or Chapter 13 bankruptcy. A successful bankruptcy filing will discharge your debt, making you no longer liable for paying outstanding obligations. However, there are certain kinds of debts that cannot be cleared, or discharged, through bankruptcy. At the Bankruptcy Center of Illinois, our DuPage County collections and credit lawyers bring decades of combined experience to our practice. We are skilled attorneys prepared to present your case in a favorable manner while asserting your rights under both state and federal law.
Generally, most debt is dischargeable, including medical bills and credit card debt. Non-dischargeable debt does not qualify for discharge. This means that this type of debt does not go away in a Chapter 7 bankruptcy.
Debt that falls within a certain category will not be discharged. Congress has determined that certain debt should not be discharged because it goes against public policy. Under extraordinary circumstances, some of these debts may be discharged. Otherwise, even when your consumer debt is discharged, creditors will be able to pursue and collect debt that falls under these categories.
The most common examples of non-dischargeable debt include child support and student loans. Certain taxes are non-dischargeable, as are types of debts that are automatically non-dischargeable include Government agency debts for penalties and fines. Certain debts listed as non-dischargeable under the Bankruptcy Code may be discharged or eliminated in Chapter 13 bankruptcy.
Creditors maintain rights in bankruptcy court. They may file a non-dischargeability complaint to challenge a debtor’s ability to discharge their debt. Often, non-dischargeability cases lead to settlement, although the bankruptcy judge determines whether a matter will be litigated before the court.
A common allegation set forth by creditors is that the debtor did not intend to pay back the money at the time they borrowed the money. The court will evaluate the subjective intent of the debtor, and apply a specific test to assess whether the creditor’s claim is valid. In their analysis, the court does consider what the borrowed funds were used for.
For some categories of debt, the court holds a hearing that allows for the creditor and the debtor to present arguments concerning the debt. Examples of this kind of debt include luxury goods purchased with a credit card, provided the amount of the purchase exceeds $650 in the 90 days before filing for bankruptcy and is owed to a single creditor. Other debts that may not be discharged include those that were obtained by misrepresentation or fraud, such as false pretense used on a credit application. Debt that was incurred by intentionally causing harm to someone or their property will also not be discharged.
Bankruptcy courts ultimately determine whether to object to a discharge. There is no absolute right to have debts discharged. Individuals must meet all requirements under law. If a debtor does not comply with the rules or the procedures for a Chapter 7 bankruptcy, the court may not discharge their debts.
A debtor that does not fully account for lost assets or destroys bills and records, hiding property in an effort to defraud the creditor, is unlikely to have a successful discharge of their debt. Violating a court order may also lead to denial of discharge. This is true even for debt that would normally be discharged.
If you file for bankruptcy too frequently, especially if it has been a short period of time, you may not be eligible to receive a discharge of debt. Filing a Chapter 7 case within eight years of the filing date for the first case, for example, will not result in a discharge of debt. Chapter 13 cases must be filed more than two years from the first filing.
If you are facing non-dischargeable debt, the DuPage collections and credit attorneys at the Bankruptcy Center of Illinois can help. Our experienced team can walk you through each step of the case, can help you understand the types of debt commonly discharged and how that affects your situation. We provide a free consultation. Contact our office to learn more by phone at (773) 993-0024 or online.