Bankruptcy Filing Does Not Completely Give You A Clean Slate

2008-09-29 10:56:17

( Financial )



As the economic meltdown continues, bankruptcy filing has continued to rise in numbers across all fifty states. While filing bankruptcy gives you a relief of stopping a foreclosure sale and allowing you to repay your debts in partial amount, it does not give you the complete clean slate that you would have wanted. Obligations such as student loans, taxes as well as child support and alimony are generally debts that cannot be discharged by mere bankruptcy filing.

Education Debts

Before the passage of the 2005 bankruptcy law, student loans were used to be discharged by a bankruptcy court. Because of some reports of abuses, where students would take out this type of loan to fund their professional degree, and do not repay it by bankruptcy filing, and after being discharged from the loan, they then begin to start their lucrative careers with high salaries, Congress makes the rules on discharge of student loans more strict.

You may be able to discharge your student loan only if you can prove that you do not have the capacity to repay it now and even in the future. Showing proof that you are in extreme hardship is not that easy. If, however, you fund your college degree through credit cards, then you may have a better chance of discharging this debt by bankruptcy filing. In this instance, it is no longer treated as a student loan, but a credit card debt.

Taxes

Your unpaid income taxes and any other taxes cannot be normally discharged despite a bankruptcy filing. But you may be able to clear this debt, if you have followed the requirements imposed by the bankruptcy law and the internal revenue service. However, if you filed your tax return fraudulently or you evaded tax payment willfully, there is no way that you will be discharged of your past-due tax bills.


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