Are Your Debts Primarily Child Support, Taxes or Student Loans? Chapter 7 May Not Be for You
When you’re looking at your personal options for getting a fresh financial start, the ability to permanently discharge debts under Chapter 7 can be extremely attractive. After all, wouldn’t you rather rid yourself of the burden of those debts forever? Unfortunately, though, there are some limitations on what debts may be discharged in Chapter 7. If the bulk of your indebtedness is tied to these types of obligations, a Chapter 7 filing may not provide the relief you want and need.
Domestic Support Payments
Alimony and child support fall under the definition of a domestic support obligation under the bankruptcy laws, and may not be discharged, either in Chapter 7 or in Chapter 13. Property settlements in a divorce may be dischargeable in a Chapter 13, but not in a Chapter 7 filing.
Tax Arrearages
Some tax debts may be discharged, but only in extremely limited circumstances:
- Only income taxes can be discharged
- The income tax debt must have been due at least three years prior to the filing of your bankruptcy petition
- You must have filed the return for which the income taxes were due at least two years prior to the filing your bankruptcy
- The Internal Revenue Service must have assessed the income tax at least 8 months (240 days) before the date your filed your bankruptcy petition
- There must be no evidence of fraud or willful evasion of your tax liability
Student Loan Payments
As with tax debts, student loan arrearages may be dischargeable, but only in rare situations. To discharge student loan debt, you must typically file an additional petition, known as an “adversary proceeding.” Different courts apply different tests to determine whether student loan obligations can be discharged:
- Some require only that you show that you would incur an undue hardship if you had to pay your student loan debt
- Some follow the Brunner test, which allows discharge if you can show that you lack the resources to maintain a minimal standard of living if you had to pay your student loan payments, that your current financial situation is likely to persist for most of the repayment period of the loan, and that you have made a good faith effort to repay the loan.
- Some courts will make a decision based on the “totality of your circumstances.”
Contact an Experienced Rockwall, TX Bankruptcy Attorney
Make certain a Chapter 7 filing will provide the fresh start you need. At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
