Many individuals considering bankruptcy are often under the assumption that virtually all their debts are included if they file for Chapter 7 bankruptcy (liquidation) or Chapter 13 bankruptcy (debt restructuring).
Unfortunately, this is not the case. There are some debts that cannot be eliminated even if you go the drastic route of filing bankruptcy. These include:
In most cases, student loans are not discharged when you file for bankruptcy. This, unfortunately, includes all types of student loans. Whether federal loans, private loans, or school loans, it’s not as easy to get rid of especially since these types of loans are exempted from bankruptcy law.
The only way around this is if you can somehow prove at the time you file for bankruptcy that you will never be able to acquire work due to disability and that it is impossible for you to pay off the loan. It is, however, very difficult to qualify for exception so most bankruptcy lawyers advise against following this course.
One option to decrease the burden of student loans is to apply for an Income-Based Repayment Plan or the Income-Contingent Repayment Plan under the College Cost Reduction and Access Act of 2007. Those who qualify for either plans still have to pay off their student loans but payments are reduced based on financial ability to pay. Loans can also be forgiven after 10 or 25 years of payments either based on one’s career choice or if under the Income-Contingent Repayment Plan, regardless of career choice.
The Public Service Loan Forgiveness Plan is another way to ease the burden of student loans. Under this plan, eligible candidates can apply for employment in government agencies or nonprofit agencies to pay off their loan. Those who can prove that their income is less than 150% of the federal poverty level will have $0 loan payments for as long as they remain within that income margin. However, 120 monthly payments is still required before the loan is forgiven. It is also worth noting that this plan only applies to federal direct student loans.
Both child support and alimony are exempted from bankruptcy law. All dues payable for this purpose cannot be discharged even after filing bankruptcy.
Secured debt is also exempt from bankruptcy. This applies to consumer debts like vehicles and other expensive items like jewelry. Once you file for bankruptcy, you either have to forfeit or pay off your remaining balance to your lender.
You can, however, surrender the item to the lender to wipe off your existing debt.
Divorce Legal Fees and Ex-Spouse Credit Card Debt
Any legal fees acquired during a divorce and any credit card debt under your name or your ex-spouse cannot be wiped out with bankruptcy. If you are the party who agreed to settle all legal fees and debts acquired during your marriage, you will still have to settle all debts even after filing for bankruptcy.
It is important to check if your type of debt can be discharged to avoid unnecessary filing of bankruptcy.
Robert Aronov Esq: Call 877-529-6699: Bankruptcy lawyer in Queens, NYC, Brooklyn, Long Island & Manhattan. Cheap & inexpensive chapter 7-11-13 in NY