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Will all my debts be discharged in bankruptcy?

One of the common questions asked by Washingtonians considering bankruptcy is whether all of their debts will be wiped off the books, or discharged, to use the technical term. The answer is "probably not." Congress has determined that, for reasons of public policy, certain types of debts cannot be discharged in a bankruptcy proceeding. Those reasons can be quite complex, but an enumeration of debts that cannot be discharged can provide helpful guidance.

The exemptions vary for individual debtors, depending upon whether they filed under Chapter 7 or Chapter 13. The most common exemptions from discharge are listed in Sec. 523 of the bankruptcy code. These include debts owed for unpaid taxes, customs duties, money or property obtained by fraud, debts not disclosed on the debtor's bankruptcy disclosure forms, and money owed as a fine, penalty or forfeiture. Another important category of debts excepted from discharge include damages owed for death or personal injury caused by the debtor's operation of a motor vehicle or boat while intoxicated. Many potential bankruptcy filers are especially interested in discharging debts created by a recent divorce. Domestic support obligations, including child support and alimony, cannot be discharged.

Most debts listed in Sec. 523 are automatically excepted from discharge if the debt fits one of the categories in that section. However, debts incurred because of fraud can be excepted only if a creditor asks the court to determine that the debts falls into one of the categories in Sec. 523. Some debts not otherwise subject to discharge can be discharged if the court finds that requiring payment of the debt would work a substantial hardship on the debtor. The burden of proving hardship falls on the debtor.

Answering the question of whether a specific debt can be discharged is likely to depend upon the circumstances under which the debt was incurred. An experienced bankruptcy attorney can often provide very useful advice about whether a particular debt can be discharged.

Source: United States Courts, "Discharge in Bankruptcy - Bankruptcy Basics," accessed on Jan. 1, 2018

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