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Dischargeable and Nondischargeable Debts
Not all debts are dischargeable when a person files for bankruptcy. Debts that are not discharged must still be timely paid even after the debtor is granted a discharge by the court. The types of debts that are most often not dischargeable are those incurred due to the debtor’s behavior or because the nature of the debts is such that they should not be discharged for public policy reasons.
Long Island Attorney Explains Dischargeable and Nondischargeable Debts
Contact the law firm of Andrew M. Doktofsky, P.C. at (631) 673-9600 for your questions about whether your debts are dischargeable when filing for bankruptcy. Attorney Andrew M. Doktofsky’s practice is focused on consumer bankruptcy law and he possesses the knowledge and experience necessary to determine if your debts are dischargeable under Chapter 7 or Chapter 13 of the Bankruptcy Code. Call Andrew M. Doktofsky, P.C. today if you have questions about your debts throughout the areas of Suffolk County and Nassau County, New York.
New York Bankruptcy Nondischargeable Debt Information Center
Nondischargeable Debts Overview
According to 11 USC § 523, certain consumer debts are not dischargeable under the federal Bankruptcy Code. The Code provides for 19 categories of debts excepted from discharge when a consumer files for bankruptcy. Certain exceptions to discharge apply automatically. However, other types of debts are not automatically excepted from discharge, and the debtor’s creditors must ask the court to label these debts as nondischargeable. Upon notice and a hearing, the court may deem these debts nondischargeable.
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Debts that are Automatically Nondischargeable
The following are the most common types of debts that are automatically not discharged:
- Student Loans – Loans incurred for higher education, including government insured loans and loans from for profit lenders, or a debt for the repayment of a scholarship or stipend, are generally not dischargeable unless the debtor demonstrates that repayment of the loan would create an undue hardship on the debtor or the debtor’s dependents. It is extremely difficult to show this undue hardship, and the court rarely grants discharges for student loans.
- Income taxes due less than three years before a debtor files for bankruptcy are not dischargeable in Chapter 7. They are dischargeable in Chapter 13, if a return was timely filed. However, taxes due less than three years before a Chapter 13 filing are considered priority debts, which generally must be paid in full in the Chapter 13 plan.
- Taxes that were due more than three years before the bankruptcy filing, and for which a return was timely filed, are dischargeable. If the tax return was filed late, the taxes are dischargeable only if the return was filed more than two years before the date of the bankruptcy filing.
- Debts for tax years for which the debtor did not file a return are not dischargeable.
- Debts for fraudulent tax returns are not dischargeable.
- A business debtor’s debts for failure to pay certain taxes, such as withholding taxes or sales taxes, are not dischargeable, regardless of how many years prior to the bankruptcy filing that they were incurred.
- Debts incurred to pay nondischargeable taxes are not dischargeable in Chapter 7, although they are dischargeable in Chapter 13.
- There are many factors that must be examined by an experienced bankruptcy attorney to determine if a tax debt is dischargeable.
- Domestic Support Obligations - Debts for child support or spousal support arising from a court order, decree or separation agreement are not dischargeable.
- Debts to a spouse, former spouse or child of the debtor, that are not in the nature of support, incurred pursuant to a property settlement agreement , divorce decree or other court order, are not dischargeable in Chapter 7, although they are dischargeable in Chapter 13.
- Government fines and penalties that are punitive, as opposed to compensatory, are not dischargeable in Chapter 7, although they are, for the most part, dischargeable in Chapter 13.
- Debts incurred due to another person’s death or personal injury arising from the debtor’s operation of a motor vehicle while intoxicated.
- Debts owed for loans from pension, profit sharing or other qualified plans.
An issue that often arises is whether debts that were not listed in a bankruptcy filing are discharged. Technically, under the Bankruptcy Code, these debts are not discharged. However, most courts have found that such debts are discharged if the case was a no-asset Chapter 7 case and the debt is otherwise dischargeable.
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Debts that are Deemed Nondischargeable Only upon Determination of the Court
There are three categories of debts that are not automatically discharged. In order for these debts to be excepted from discharge, the creditor must timely file a complaint to determine dischargeability of the debt. Upon notice and a hearing, the court may deem these debts non-dischargeable:
- Debts incurred that were obtained by false pretenses, misrepresentation, fraud, or written statements that were materially false respecting the debtor’s financial condition. However, certain debts in this category are presumed to be nondischargeable. These include debts owed to a single creditor, totaling more than $650 for luxury goods or services incurred in the 90 days prior to the bankruptcy filing; and cash advances in excess of $925 incurred within 70 days prior to the bankruptcy filing.
- Debts incurred due to embezzlement, larceny or fraud while acting in a fiduciary capacity.
- Debts incurred for willful and malicious injury by the debtor upon another person, entity or property, are not dischargeable in Chapter 7, although they are dischargeable in Chapter 13.
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Dischargeable Debts in New York
Most debts not listed above are dischargeable in Chapter 7 and Chapter 13 of the Bankruptcy Code. The following are examples of the most common types of debts that are dischargeable in bankruptcy:
- Medical bills
- Business debts
- Leases that are rejected
- Credit card debts
- Other “open account” debts
- Debts in collection
- Past due utility bills
- Past due rent
- Civil court judgments
- Revolving credit accounts
- Unsecured personal loans
- Attorney’s fees, except if incurred in connection with domestic support obligations
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Chapter 13 Dischargeable Debts in New York
Certain debts that are not dischargeable in Chapter 7 are dischargeable in Chapter 13. Chapter 13 provides for more flexibility regarding dischargeable debts than Chapter 7 because the debtor will usually pay back at least some debts before being granted a discharge. In addition to debts that are dischargeable in Chapter 7, the following debts are dischargeable under Chapter 13 that are nondischargeable in Chapter 7:
- Debts for willful and malicious injury to property of another person or entity. However, debts incurred for restitution or damages, awarded in a civil action against the debtor, for willful or malicious injury to another person are not dischargeable
- Debts incurred to pay off nondischargeable tax obligations
- Debts to a spouse, former spouse or child of the debtor, that are not in the nature of support, incurred pursuant to a property settlement agreement, divorce decree or other court order.
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Resources in New York for Dischargeable and Nondischargeable Debts
American Bankruptcy Institute – This organization is dedicated to research and education on all matters related to bankruptcy. This site has unbiased analysis of bankruptcy issues and resources for members of the organization, journalists, the public and Congress.
United States Bankruptcy Code - Title 11 of the United States Code, which is entitled “Bankruptcy,” contains the federal law regarding bankruptcy. The Code governs all bankruptcy cases in the United States. This link is directly to all chapters in Title 11.
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Andrew M. Doktofsky, P.C. | Long Island Bankruptcy Lawyer
Contact the law firm of Andrew M. Doktofsky, P.C. today for a free consultation about whether your debts are dischargeable in bankruptcy in Suffolk County and Nassau County, New York. Andrew M. Doktofsky will help you determine what debts are dischargeable and nondischargeable under Chapter 7 and Chapter 13 of the Bankruptcy Code. Call (631) 673-9600 for a consultation concerning the dischargeability of your debts.