The purpose of seeking bankruptcy is to resolve debts through a legal channel that can provide a release from liability over those debts. Whether those debts are resolved through a Chapter 7 liquidation case or a Chapter 13 repayment plan, the ultimate outcome for any filer is to receive a debt discharge. However, there are some debts that are not automatically eligible for a discharge in bankruptcy and may not qualify for debt resolution.
Debts that are never accepted into bankruptcy filings are those that are associated with civil or criminal responsibility. Child and domestic support payments are not eligible for a debt discharge in bankruptcy and must be repaid. However, some of the interest associated with past due payments may be lifted through a Chapter 13 filing. Debts incurred through fraud, criminal negligence or actions are also not eligible for discharge in bankruptcy. Any payments and fines that resulted because of a crime are required to be repaid and cannot be discharged in bankruptcy.
There are some debts are the exception to the rule and may be eligible for a debt discharge. Income tax debts may be eligible for a discharge if (a) the debt is more than three years old, (b) the debt has a current tax return on file with the IRS and (c) the debt was incurred through a correct return, or not considered fraudulent. Student loan debts also fit this category in that they are generally not dischargeable in bankruptcy, but may be considered in extreme cases. For a student loan debt to be considered the debt must (a) be a private student loan debt, (b) proven to cause undue financial hardship and (c) had good faith efforts towards repayment. Even if tax debts or student loan debts do meet these criteria, they are most likely to only be eligible for a Chapter 13 filing only.
Also please check out some of our bankruptcy lawyer reviews.