Some debt cannot be eliminated in bankruptcy

Although a Chapter 7 or Chapter 13 bankruptcy is a good option for eliminating debt and providing the filer with a fresh start, it is not always the best solution for every financial problem. As with most legal remedies, whether you should seek bankruptcy protection depends largely on your specific situation.

For example, if you have one of the following types of debt, bankruptcy may not be the best option for you. That is because these debts are generally nondischargeable in bankruptcy. Therefore, filing for bankruptcy would probably not solve your problem.

First, student loans generally may not be eliminated in bankruptcy, as we have discussed in several previous bankruptcy blog posts. This applies to both federal and private student loans. There is a very slight exception for filers who are able to prove that they will never be able to work again because of a permanent disability. However, bankruptcy courts very rarely offer relief from student debt.

Second, secured debt is generally not dischargeable. This applies to debt for which you have received a tangible item, such as a car or jewelry. You may be able to return the item for an elimination of your debt, but you won’t be able to keep the goods while also having your debt discharged.

Third, much of the debt assigned to you in family court, such as child support, alimony and your former spouse’s legal fees are not dischargeable in bankruptcy. In addition, court-ordered restitution, money you are ordered to pay for causing an injury or financial loss, can’t be wiped out in bankruptcy.

If you have one of these types of debt but are still struggling to make ends meet, you should consider contacting a Georgia bankruptcy lawyer or financial planner to discuss your options.

Source: Bankrate.com, “Debts that can’t be wiped out in bankruptcy,” Justin Harelik, Jan. 31, 2012