Bankruptcy Alphabet-N is for Nondischargeable Debt

While the filing of a bankruptcy ultimately leads to significant debt relief, there are situations where your debt may not be dischargeable, or wiped away. We call this nondischargeable debt.

     N is for Nondischargeable Debt

Photo by Leo Reynolds

The following is a list of debt that is not discharged upon the completion of a bankruptcy case.

-Unpaid Taxes: All taxes that are given priority status under the Bankruptcy Code are nondischargeable with very limited circumstances. If you have unpaid income taxes, you should consult with a bankruptcy lawyer to determine whether your tax debt meets the exception.

-Debt Caused by Fraud: This kind of debt occurs frequently in bankruptcy cases. In order for this particular debt to be rendered nondischargeable, a bankruptcy judge must determine whether the debt was caused by fraud through an Adversary Proceeding.

-Unlisted Debt: Debtors are required to list all creditors and debt they have. Failure to list a particular debt could lead to nondischargeability of that debt. Make sure you include all of the debt you have.

-Debt Caused by Fraud from a Fiduciary or Embezzlement: Similar to debt caused by normal fraud, it also includes any fraud if the debtor was in the role of a fiduciary, or person in a special legal relationship such as a conservator, guardian, trustee, or partner, etc. It also includes acts where a debtor wrongfully embezzled or took property of another. Again, a creditor must bring an Adversary Proceeding to determine whether the debt is nondischargeable.

-Spousal and Child Support: Any alimony or child support you owe will not be discharged in a bankruptcy filing.

-Willful and Malicious Injury: Debts that result from an intentional and deliberate injury to another. This is a special debt that can be discharged in a Chapter 13 case, but not Chapter 7. A creditor must bring an Adversary Proceeding to determine whether the debt is nondischargeable.

-Fines and Penalties: Debts related to fines and penalties from governmental entities is not dischargeable. There is a small exception regarding pecuniary loss, so you should consult with an attorney to determine whether your particular fine or penalty will be dischargeable.

-Student Loans: Debts related to education are not dischargeable under most circumstances. They can be discharged if the debtor brings an Adversary Proceeding asserting that paying the student loan created a undue burden on debtor and his/her dependents. See my previous article on student loan dischargeability.

-Driving While Intoxicated: Any debts caused from the debtor driving intoxicated are not dischargeable.

-Waiver or Denial of Discharge: If the debtor had filed bankruptcy before and either waived the discharge or was denied a discharge for a particular debt will not be dischargeable in a subsequent bankruptcy filing.

-Criminal Restitution: If ordered to pay restitution in a federal criminal case, the debt is nondischargeable.

-Debts Incurred to Pay Nondischargeable Taxes: If you use a credit card or check cashing scheme to pay your taxes, the debt associated with the credit card or check cashing company would be nondischargeable.

-Debts resulting from Divorce or Separation: Any debt incurred during divorce or separation is not dischargeable.

-Fees Imposed for Litigious Acts: Fees imposed on a debtor for litigation (filing fees) are not dischargeable.

-Debts Relating to Pensions: Debts for 401k loans and the like are nondischargeable.

-Debts for fraud against Deposit Institutions or failure to maintain capital of a deposit institution: These are uncommon exceptions related to the banking industry.

As you can see, there are some debts that are not wiped away by filing bankruptcy, but the overwhelming nature of bankruptcy laws are to provide debtors significant debt relief.

Other Bankruptcy Lawyers talking about the Letter N include:
Naked-New York Bankruptcy Attorney, Jay S. Fleishman
Nondischargeable-Northern California Bankruptcy Lawyer, Cathy Moran

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