Bankruptcy can offer much-needed relief to individuals in Texas who face overwhelming debt. However, it is essential to recognize that bankruptcy does not discharge all debts.
Some debts still fall under the debtor’s responsibility, even after completing the bankruptcy process. Knowing which debts are not dischargeable can help you make informed decisions about whether bankruptcy is the right solution for your financial situation.
In most cases, bankruptcy does not discharge student loans, including both federal and private student loans. However, an exception called the “undue hardship” rule exists. To qualify for this exception, a debtor must prove that repaying the student loans would cause undue hardship on themselves and their dependents. This difficult standard requires the court to consider factors such as income, expenses and the likelihood of future financial improvement when making a determination.
Tax debts and other government obligations
Bankruptcy does not discharge certain tax debts, especially if they are less than three years old or assessed within 240 days before filing for bankruptcy. Tax debts related to fraudulent returns or unfiled returns also remain non-dischargeable. Other government-related debts, such as fines, penalties and restitution orders, typically do not qualify for discharge in bankruptcy.
Child support, alimony, and personal injury judgments
Other charges that bankruptcy will not discharge are child support and alimony, as courts prioritize the needs of children and former spouses over the debtor’s financial situation. Additionally, bankruptcy does not discharge personal injury judgments resulting from accidents caused by the debtor’s negligence or misconduct, such as driving under the influence.
Understanding that bankruptcy does not wipe away all debts is crucial. Being aware of these non-dischargeable debts can help you make better decisions about your financial future and determine whether bankruptcy is the right choice for you.