One of the key features of Chapter 7 bankruptcy is that there is no absolute limit to the amount of debt that can be discharged. Unlike Chapter 13 bankruptcy, which has specific debt limits for both secured and unsecured debts, Chapter 7 doesn’t impose a cap on the amount of debt a filer can discharge.
This means that whether someone has $50,000 or $500,000 in qualifying unsecured debt, they can still be eligible for Chapter 7 bankruptcy relief. The operative word here, though, is “qualifying.” Not all debts can be discharged, and creditors can fight against discharges for otherwise qualifying debt.
Nondischargeable Debts in Chapter 7
While Chapter 7 bankruptcy offers significant relief by discharging many types of debts, it can’t eliminate all financial obligations. Some debts are considered nondischargeable by law, meaning they remain the responsibility of the debtor even after the bankruptcy process is complete.
The following are a few nondischargeable debts to consider:
- Student loans: Generally, student loans are not dischargeable unless the debtor can prove that repaying them would cause undue hardship, which is a challenging standard to meet.
- Taxes: Certain types of tax debts, particularly recent tax liabilities, cannot be discharged. However, older tax debts may be eligible under specific conditions.
- Child support and spousal support: Obligations related to family support, including child support and alimony, are non-dischargeable.
- Debts from fraud: Debts incurred through fraudulent activities or false pretenses are not dischargeable.
- Criminal fines and restitution: Any fines or restitution imposed as part of a criminal sentence must be paid, regardless of bankruptcy.
- Debts from willful and malicious injury: Debts resulting from willful and malicious injury to another person or their property are non-dischargeable.
- Debts from personal injury: Debts arising from personal injury or death caused by the debtor's intoxicated driving are not dischargeable.
- Certain HOA fees: Homeowners association fees that come due after the bankruptcy filing are typically nondischargeable.
- Debts not listed in the bankruptcy filing: If a debtor fails to list a debt in their bankruptcy filing, that debt may not be discharged.
If you are struggling with nondischargeable debt, you may be able to reorganize it in Chapter 13. Consult with a bankruptcy attorney to learn more about debt relief options that may be available to you.
Why Would a Creditor Challenge My Discharge?
Creditors have the right to challenge the discharge of debts in Chapter 7 bankruptcy under certain circumstances. This process, known as an "adversary proceeding," involves creditors filing a lawsuit within the bankruptcy case to prevent the discharge of specific debts.
The most common reasons why creditors challenge a discharge are when credit was used to purchase luxury goods or take out cash advances. If significant spending on these categories occurs within 90 days of the bankruptcy petition’ filing, creditors are most likely to assert their rights to challenge the discharge.
Another reason is fraud. A creditor is very likely to challenge a discharge if they believe the debtor engaged in fraud to obtain credit, such as falsifying information on a credit card application or taking out a loan without the intention to repay it.
If the creditor prevails in the adversary proceeding, the debt owed to them may be excluded from discharge.
Contact Us for Legal Assistance
Navigating the complexities of bankruptcy can be overwhelming, but you don't have to do it alone. Whether you're considering filing for Chapter 7 or another type of bankruptcy, professional guidance can make a significant difference in the outcome of your case.
Our experienced lawyer at Nguyen Law Group is here to help you understand your options, prepare your paperwork, and represent your interests throughout the bankruptcy process.
Send us a message online to get started today.