What Debt is Exempt From Bankruptcy ?
Wednesday, February 6th, 2008 Subscribe To Our Feed
It may seem like a contradiction in terms but just like some assets are exempt from a bankruptcy, so too are certain debts. What this means is that no matter what the outcome of a bankruptcy hearing, you will still have to service or pay these debts regardless. This article will detail what type of debts are exempt according to the latest bankruptcy laws.
One common question about debt exemption is to do with child support or maintenance support. If you are paying or have been ordered to pay these moneys by a court then they are generally considered to be exempt from bankruptcy. Again, this means that you will have to find money to pay these regardless of if you have successfully filed for bankruptcy. This includes all the law chapters, including Chapter 7 and Chapter 13. Sometimes people will file as they see this as a way to avoid their responsibilities but this will not help them. They will have to pay the support in full.
Another instance of a debt exempt from bankruptcy is IRS liens. If you have been subject to a tax audit that has led to you having to pay more taxes, then the IRS may put a lien on your home or take a portion of your wages. Depending on the amount you owe the government, this amount can add up to a large amount of money that is, unfortunately, exempt from bankruptcy.
Whilst covering the government, it should also be noted that any government loans are generally considered to be exempt from bankruptcy. This includes things like student loans that were financed by the government.
Finally, any court orders where you are ordered to pay an individual a specified sum of money are also considered to be exempt from bankruptcy.
These are some of the reasons why you should understand the full consequences of filing for bankruptcy as many debts will still be active and you will have the added problem of a low credit rating and perhaps the stigma of filing for bankruptcy to your name.
Before going down this route you should conduct a thorough audit of your finances. You should qualify all your outgoings and your current monthly income. If any of the outgoings are any of the above them you may want to reconsider filing for bankruptcy. Additionally, you should find out if there are any outstanding judgments awarded by courts against you. In most cases you will be notified if a litigation process against you is beginning. So you should at least be aware that such judgments could exist. Again you are not protected against these should you file for bankruptcy.
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