Bankruptcy is generally a last financial resort when other options, like negotiating with creditors, have fallen short. However, bankruptcy shouldn’t be stigmatized but rather viewed as a legal resource for those overwhelmed by debt in Florida.
In reality, bankruptcy provides a vital lifeline for individuals to reset their financial standing and get another chance at financial stability and success. According to the United States Courts, over 380,000 Americans took this step in 2022, underscoring just how common it actually is.
But, are all those debts just wiped away? The simple answer is no, but the type of filing also matters. With Chapter 13 bankruptcy, your debt is generally not forgiven but consolidated into a more manageable payment plan by the court. With Chapter 7 bankruptcy, many debts are completely discharged. We’ll focus on Chapter 7 in this article to explore which debts are eligible for discharge.
Debts Not Forgiveable Through Chapter 7 Bankruptcy
When considering a Chapter 7 bankruptcy filing in Florida, it’s crucial to understand which debts are actually eligible to be discharged and which are not. This ensures that the decision to file is made for the right reasons and with realistic expectations about the outcome.
Here’s a rundown of debts that are typically non-dischargeable in a Chapter 7 bankruptcy:
Student Loan Debt: Despite being one of the largest types of debt in the country, student loan debt is rarely forgiven in bankruptcy due to stringent federal laws. The bar to discharge these debts is high thanks to Section 439(a) of the Higher Education Act of 1976 and an expansion of those principles under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Child Support and Alimony: Obligations such as child support and alimony are not dischargeable because they are deemed essential for the welfare of a child or former spouse. Bankruptcy does not absolve these responsibilities.
Personal Injury and Wrongful Death Debts: If you owe debts from personal injury or wrongful death cases, especially as a result of intentional actions, these are not forgiven. The victims or their families are still seen as needing and deserving of this financial support.
Certain Taxes and Government-Imposed Debts: Recent tax liabilities, including income, property, and social security taxes, are expected to be paid. However, older tax debts may be discharged under certain conditions. The same applies to recent government fines or restitution orders.
Home and Car Liens: If you keep your home or vehicle post-bankruptcy, any liens against them remain. The law aims to prevent the evasion of secured loan payments. However, if you are surrendering these assets as part of your bankruptcy plan, the associated debts may be discharged.
Recent Debts: To deter bankruptcy abuse, debts incurred shortly before filing (typically within 90 days) for non-essentials are not dischargeable. However, debts from necessities like healthcare may be forgiven.
Work with a Florida Bankruptcy Attorney to Assess Your Situation
There are a number of other debts that are typically not eligible for bankruptcy. It’s important to consult with an experienced bankruptcy attorney in Florida who is able to assess your situation and set realistic expectations about your case.
The Law Office of Ray Garcia is dedicated to guiding Floridians through this complex process and towards a new financial beginning. Contact our team to start your case and move toward relief from overwhelming debt.
Law Office of Ray Garcia, P.A.
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