If you are considering filing chapter 7, know that very few financial moves can match it. Almost nothing allows the filer to rid themselves of debt in as little time. If your credit card bills, personal loans, payday loan, and medical debt is a burden, consider chapter 7. Filers would do well to keep in mind that not every debt can be discharged with a chapter 7 filing. To learn more about a few debts that tend to hang on after bankruptcy along with some tips on dealing with them, read on.
Student Loan Debt
Several upcoming changes in the bankruptcy code (potentially in 2022) could allow more people to discharge student loan debt using chapter 7. However, as of now, it can be a challenge to do so. Only those in dire straights and that meet every requirement can add student loan debt to their bankruptcy filing. In general, filers must show that having to honor their student loan debt would create a severe hardship. The rules say the filer should prove that:
- The loan is currently up to date with no missed payments.
- If you don't get bankruptcy relief with the loan, your financial situation could lead to being unable to pay for food, housing, and more.
- That you have no expectations of being able to pay off the debt any time soon even with the bankruptcy eliminating other debts. This last requirement refers to the overall financial relief many filers experience once they no longer must pay other debts.
New Income Tax Debts
Older tax debts (older than 3 years) may be discharged with chapter 7, but newer tax debts will hang around until they are paid. The IRS offers installment payment options and programs for those unable to pay what they owe, however. If your tax debt is nearly 3 years old, consider waiting a bit and then filing to obtain the maximum benefit of chapter 7.
Back Child Support Debts
Those ordered to pay child support must continue to make payments because chapter 7 does not discharge that obligation in any manner. If you are behind, you cannot include that debt either. If liens or wage garnishments regarding those debts are in place, they will remain in place until paid. Along those same lines, legal fees and judgments not related to financial matters also remain in place. For instance, if you lost a court case after a car accident and owe the other driver money, you must pay what you owe regardless of bankruptcy.
Speak to your bankruptcy lawyer to find out more.