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What debts cannot be eliminated in personal bankruptcy?


While personal bankruptcy is viewed as a viable option for Texas residents who have been negatively affected by the struggling economy, are facing mounting bills and need debt relief to get back on stronger footing, it is not the panacea that some might be mistaken in believing it is. Thinking that a simple bankruptcy filing will eliminate debt completely is a mistake and it can result in people misunderstanding what is possible and compounding the initial issues that got them into financial trouble in the first place. Knowing which debts can be eliminated is step one before moving forward.

There has been much in the news about student loan debt and how it can be handled. There's no doubt it is spiraling out of control and harming a great number of people, but as of yet the majority of cases in which a person has a significant student loan will not be wiped out in bankruptcy. This goes for every type of student loan. An exception is if the borrower has a medical issue and can never work again due to full disability. Secured debt cannot be eliminated. Such items as a car, jewelry or other items will not be retained. The lender, with a security interest in the item, will want it paid for or the debtor to surrender it. Surrendering it will end the obligation to pay for it.

Alimony and child support cannot be eliminated. In some cases, a spouse has accrued legal fees and debts on credit cards and, even if there is a divorce, this cannot be eliminated. Paying restitution as part of a court order cannot be discharged in a bankruptcy. If, for example, a person had a car accident due to DWI or negligence, then there cannot be a discharge of what is owed. Income tax liability can, in part, be wiped out. But there are certain criteria for that to take place.

While personal bankruptcy is a viable option for a many forms of debt, those who are considering it must know what they cannot have eliminated in the filing. Speaking to an attorney who can help with filing for bankruptcy and provide advice and guidance on that which can be eliminated and that which cannot is beneficial when making the decision.

Source: bankrate.com, "Debts that can't be wiped out in bankruptcy," Justin Harelik, accessed on April 19, 2016

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