Although the type of debts which can be eliminated in Chapter 7 and Chapter 13 are quite different, certain debts cannot be discharged in either proceeding – for example, debts such as child support, support alimony, property settlements, criminal fines/restitution, and damages arising from drunk driving. However, you may be able to repay obligations of these types in a Chapter 13.
Generally a Chapter 7 bankruptcy will not discharge a debt for fraud, embezzlement, willful or malicious injuries, or debts which arise from fiduciary responsibilities. Recent income taxes and student loans are generally not dischargeable in a Chapter 7. Again, in a Chapter 13, many of these debts can be repaid in full through a three to five year payment plan, depending upon your income and the value of your assets. The rules regarding the repayment of debts through bankruptcy are quite complex. You should consult us for help in analyzing your individual case.
Can Student Loans Be Eliminated In Bankruptcy?
In October 1998 Congress changed the laws relating to student loans. As a result, student loans are generally not dischargeable in bankruptcy, no matter how old they are. There are a very few limited exceptions regarding loans which are not insured or guaranteed by the government. The new law only allows student loans to be discharged in cases of undue hardship. Financial inability to pay, by itself, is normally not enough to be considered an undue hardship by the Court. In all cases, you must first file an adversary petition in the Bankruptcy Court. This will usually result in substantial pre-trial work and an eventual trial in the United States Bankruptcy Court. This means we must litigate the case in the Bankruptcy Court, and there will very likely be a trial conducted before the Bankruptcy Judge. We charge an additional $250.00 per hour for adversary proceedings, and require a retainer of $2000.00 to initiate this kind of action. It is an expensive and time-consuming process, and the debtor has a very heavy burden of proof in establishing “undue hardship.” If you want to discharge a student loan, we’ll be glad to discuss the process with you and help you decide if it’s really in your best interests to spend this much money (usually it is not).