Will you have to pay all your debt in bankruptcy?
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It’s true that North Carolina bankruptcy can be life-changing and can get you back on track financially, but there are some types of debt that it won’t discharge. What’s true about these nondischargeable debts is that they will stick around no matter if you file Chapter 7 or Chapter 13. Some people leave bankruptcy with a bit of lingering debt, but are still better off financially and better equipped to pay the remaining balances they owe.
In this two-part series, we take a look at 20 types of debt that are not dischargeable in North Carolina bankruptcy. Here’s a quick rundown of the first 10 in part one. These are debts we see commonly. In part two in Friday’s blog, we’ll cover another ten that are rarer.
#1 Debts You Don’t Include in Your Bankruptcy Petition
If you don’t list a debt on your bankruptcy petition, the debt can’t be discharged unless it’s an innocent error and the debt wasn’t left off intentionally. Even if you leave it off, if the creditor received notice of your bankruptcy filing, the debt may still be discharged.
#2 Some Taxes and Government Duties
Income taxes for returns filed on time and that have been outstanding for payment for more than a couple of years may be discharged in bankruptcy. However, if you failed to file income tax returns or it’s for tax years a year or two before filing, they can’t be discharged.
#3 Debts From Family Court Judgments and Rulings
If you owe child support, alimony, or spousal support, those amounts cannot be lessened or discharged in North Carolina bankruptcy. If you have past-due balances, a Chapter 13 repayment plan may help you catch up but won’t discharge the debt.
#4 Debt Owed to an Ex
If you owe money to an ex-spouse from debt in a divorce decree you never paid, you can’t discharge it. These differ from child support or alimony. For instance, if you were ordered by to pay $10k to your spouse when your house sold but you didn’t, the debt can’t be discharged.
#5 Government Fines and Penalties
If you were fined by your city or county for an infraction, that may or may not be dischargeable. For instance, if you built a shed on your land without permits and the county tore it down then charged you a penalty and for the work done, the penalty part would not be discharged.
#6 Student Loans
This one is not 100% nondischargeable. If you are permanently disabled and can’t work, you might be able to have your loans discharged or if you’re in a state of long-term poverty. They can’t be discharged in most other circumstances but discharging other debt can make you better able to pay.
#7 DUI Injury Debts
If you were found guilty of injuring someone while driving drunk and have been hit with a personal injury judgment, you could not discharge that debt in bankruptcy. Other court judgments for debt may be dischargeable, though, to help you get control of your finances.
#8 Retirement Plan Loans
Debt from a loan against your 401(k), for instance, is not dischargeable because this is a debt you owe yourself. When you borrow from your 401(k), the loan is collateralized by your retirement plan. The good news is your 401(k) itself is shielded in North Carolina bankruptcy.
#9 Some HOA Fees
Homeowners association fees can be discharged in bankruptcy in some cases. Overdue HOA fees and fines are dischargeable so long as they were incurred before filing bankruptcy and if a lien has not been recorded against your property. Once a lien is issued, it’s harder.
#10 Some Attorney Fees
If you owe your lawyer for work done in a child support or child custody case, that debt cannot be discharged in bankruptcy. Legal fees for other work typically are dischargeable. Chapter 13 can get these amounts included in a repayment plan to pay out over time.
In most cases, bankruptcy can help dig you out of a financial mess. Chapter 7 can discharge most unsecured debts within just a few months to give you a clean slate. Chapter 13 buys you time to catch up on secured debt payments that are past-due, like your mortgage or auto loan, while discharging some unsecured debts.
To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt today. Call +1-919-646-2654 now for a free bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.