Certain types of debt, such as child support, alimony, and most student loans, cannot be discharged in bankruptcy. Wrongful conduct may make some debts non-dischargeable. Examples of such conduct are incurring credit card charges without the intent or ability to repay, or obtaining loans using false financial information. SOURCE: Federal Judiciary Channel (YouTube)
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The following program was produced by the United States Courts.
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As I mentioned before,
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some debts cannot be discharged in a bankruptcy.
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Certain types of debts, such as child support,
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alimony,
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most student loans,
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some federal income taxes,
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and all employer withholding taxes,
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cannot be discharged in bankruptcy.
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the debtor’s wrongful conduct may make some debts non-dischargeable.
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Examples of such conduct are incurring credit card charges without the intent
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or ability to repay,
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or obtaining loans using false financial information.
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Bankruptcy does not wipe out most mortgages or liens.
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A debtor who wants to keep his or her house
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must continue making mortgage payments.
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A debtor who wants to keep a car which is being financed
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must likewise continue making the payments.
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A debtor who is behind on mortgage payments
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may use Chapter 13 to keep his or her home
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by catching up on past due payments over time,
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plus making regular mortgage payments.
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And in a Chapter 7 case,
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certain property can be redeemed from a lien, or in other words,
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purchased for what it is worth.
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For example,
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in a bankruptcy proceeding
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the court may determine that a car on which the debtor owes $3,000
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is only worth $1,500.
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The debtor may then keep the car by paying the lump sum of $1,500.
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In either chapter, some liens on exempt personal property may be avoided altogether
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so that the debtor keeps the property
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without making further payments.
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Under certain circumstances, a debtor may be denied a discharge altogether,
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and continue to owe all debts as if the bankruptcy had never been filed.
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Some of the reasons for being denied a discharge
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are fraudulently transferring assets,
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hiding assets,
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making false statements,
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or disobeying the bankruptcy court.
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Such acts may also be federal crimes for which the debtor can be fined or imprisoned.
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We’ll tell you more about that in a later segment of this video.
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The bankruptcy code limits the frequency with which an individual may receive a discharge.
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These limits depend on the chapters under which the debtors file.
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As mentioned earlier, the law permits debtors in bankruptcy to keep or exempt certain property
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in order to make a fresh start.
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However to keep liened property such as a home or a car,
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the debtor must still pay the secured debt.
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In Chapter 7, the exemption process means that a trustee cannot sell exempt property
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for the benefit of creditors.
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Generally, the trustee can only sell non-exempt property.
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Sometimes an item of property is only partially exempt, and the trustee can sell it and pay the
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debtor the amount of the exemption.
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For example,
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if the debtor owns a car worth $3,000,
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and lives in a state where there’s a car exemption of $1,000,
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the trustee may sell the car,
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give the debtor $1,000—the exempt amount—and
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use the remaining $2,000 to pay creditors.
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In such situations, the debtor may keep the car by paying the trustee $2,000,
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the value of the car
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that is not exempt.
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The bankruptcy code provides certain federal exemptions
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and also allows each state to adopt its own exemption law
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in place of the federal exemptions.
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The availability and amount of property you may exempt, therefore, depends on the state where
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you live.
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Some common examples of exempt property under the bankruptcy code are:
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a portion of the equity in a debtor’s home,
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a portion of the equity in one motor vehicle
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and some or all “tools of the trade” used by the debtor to make a living,
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such as auto tools for an auto mechanic or dental tools for a dentist.
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You’ll lose any exemption you don’t claim.
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It’s therefore very important for you to consult an attorney
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to determine which exemptions are available.
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It’s also important to carefully list, describe and value all property you claim as exempt
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in the schedules filed with your bankruptcy petition.