By Bruce C. Truesdale, Esq.
Bruce C. Truesdale, P.C.

After you complete your bankruptcy case, many of your debts will be gone, “discharged.” This means that you no longer have a legal obligation to pay these debts, they no longer exist.

Some debts however are not discharged or cancelled by your bankruptcy case. Among debts that your bankruptcy case will not “discharge or cancel are:

Student loan debts are generally not discharged by your bankruptcy case. There are some exceptional circumstances where student loan may be discharged but the circumstances usually revolve around the debt being an “undue hardship” that must be proven during what is called an “adversary proceeding.” A proceeding that your attorney will file with the bankruptcy court seeking a determination from the Bankruptcy Court that the student loan is dischargeable. In our circuit, the 3rd Circuit, you will likely have to prove a permanent disability which will prevent you from ever repaying the loan. Your attorney can go into greater detail with you regarding what you would have to prove. Other circumstances where a student loan may be discharged may include instances where the school closed before you could complete the curriculum.

Tax debts are for the most part, non-dischargeable. However, income taxes may be dischargeable under the right circumstances. The very basic rules for discharging taxes is that 1) 3 year rule: the tax has been due and owing for 3 years from the most recent date the tax return was due (remember, your 2011 taxes do not become due until April 15th of 2012); 2) 2 year rule: the tax return has actually been filed for 2 years (so late filed returns must have been filed for 2 years before they are dischargeable); 3) 240 day rule: the tax returns have been assessed by the Internal Revenue Service more than 240 days ago (the taxes are usually assessed within 6 weeks of having been filed); 4) Non-fraudulent return rule: the tax return for the tax year in question was non-frudualent; 5) No evasion rule: the tax payer/debtor was not guilty of a willful attempt to evade the tax. Speak to your attorney about any tax debts you may have. State Taxes follow the same rules as Federal Taxes

Alimony, maintenance and support debts are not dischargeable. However, equitable distribution debts ARE dischargeable in Chapter 13 cases ONLY. You will need to discuss these debts in some detail with your attorney.

Injury claims arising as a result of drunk driving are not dischargeable.

Money obtained by fraud is not dischargeable. A creditor may file an objection to discharge of a debt for money that they claim the debtor obtained by fraud or false pretenses. Some creditors may claim a fraud was perpetrated by the debtor in an attempt to get debtors to reaffirm or obligate themselves on some portion of the debt so that it will not be discharged and will have to be paid. Do not reaffirm a debt without speaking to an attorney about it first. Do not be frightened into obligating yourself to anything, seek counsel before reaffirming a debt.

Criminal fines, criminal penalties and restitution orders are generally not dischargeable. Even fines and penalties for minor traffic matters are not dischargeable. In New Jersey, motor vehicle surcharges may be dischargeable. If you have significant motor vehicle surcharges, or if your drivers license is suspended for nonpayment of surcharges, speak to a bankruptcy attorney about them. If your driver’s license is suspended only for nonpayment of motor vehicle surcharges, your driving privileges can be restored immediately upon the filing of your bankruptcy case.