Are legal fees relieved in the event of bankruptcy

Routes to finance

The goal of most people who file for bankruptcy is debt relief or debt forgiveness. Although most debts go bankrupt, there are certain types of debt that will not be eliminated. If you owe one of these debts and you file for bankruptcy, you will still owe that debt after the bankruptcy case clears. These categories can be found in the federal bankruptcy code at 11 USC Sec 523.

After a bankruptcy case, why do some debts go away but some don't? Often it is because Congress has decided, for political reasons, that it would not benefit society to allow debtors (those who file for bankruptcy) to discharge their responsibility for these debts. In other words, when we compare the two of them, the benefit to the creditor and society as a whole outweighs the benefit the debtor would get if his or her payment responsibility were erased. For example, consider child support. For example, the benefit to the child receiving child support is more important to the child and to society than allowing the person in charge of the support to clear the debt.

Please note that the list below is non-exhaustive and that there are other categories of non-billable debt that apply to very specific situations that typically do not apply to most people. If you want to determine if any of these or any other exemptions apply to you, please contact an experienced liquidator. Do not assume that a debt is dischargeable prior to filing for bankruptcy. Always remember that bankruptcy is complex and what is non-deportable depends on a small distinction.

Student loans

Student loans are almost never discharged in a bankruptcy. The only way to get relief from a student loan is to demonstrate undue hardship. This is an extremely difficult hurdle. There is currently increasing concern about the increasing student debt in the United States.

Because of this law, there is only a small way out for students. However, there are ways you can use bankruptcy to manage your student loans. We have written quite a few articles on how bankruptcy can help you with your student loan problems. Start Here: Managing Student Loans: Introduction.

Taxes

The majority of recent taxes owed to the federal government, state, or locality are not excusable in bankruptcy. The only exception to this rule is income tax, which has strict requirements. In general, taxes that are more than three tax years old can be exempted depending on when you filed your tax returns, received extensions on returns, and other requirements. To learn more about this topic, read our article on Paying Income Taxes. Here is another article: Income Tax Debt Relief: What Is Discharge?

Domestic support

Domestic assistance obligations cannot go bankrupt. This could include, for example, marriage / child support and child support. If your ex-wife gets an assignment from a state court that obliges you to pay the wife $ 500 a month, that debt will never go bankrupt. Learn more about Delaying Domestic Support Obligations and Other Divorce-Related Debts.

Fines and restitution

Fines and penalties owed to the government are not deductible other than tax penalties. Returning to victims of criminal offenses cannot be exonerated either.

Personal injury

A guilt that you incurred while driving a motor vehicle while drunk and thereby caused personal injury or death of a person cannot be deduced. For example, if you are sued for injuring a driver, driving drunk, and a judgment has been passed against you, the judgment cannot be exonerated. See Debt Settlement: Debt That Will Not Pay Off.

Failure to list debt

Debts also cannot be paid if you don't list them on your bankruptcy plans. This happens when you fail to list the debts in a timely manner so that the creditor can file evidence of the claim and the creditor was unaware of the bankruptcy.

If you don't list all of your debts, you can be refused a discharge and it's a federal crime!

Determination of the discharge capacity

There are other debts that may not be recoverable, but only if the creditor files a lawsuit against you and the bankruptcy court rules it is not recoverable. This includes debts arising from fraud, embezzlement, theft, breach of trust, debts for willful or willful harm, and debts arising out of a marital agreement or divorce. Learn more at Discharge Debt: Debt That Can Be Discharged.

So, if you file for bankruptcy and the creditor never files a lawsuit to determine the debt as non-dischargeable, the debt will be paid. However, this is not the case with the categories mentioned above, which cannot be automatically unloaded.

LEGAL DISCLAIMER

This article is for informational purposes only and not for the purpose of legal advice. You should contact your lawyer for advice on a specific issue or issue. Using and accessing this article does not create an attorney-client relationship between the author of this article and the user or browser.

Updated July 2017 by Carron E. Nicks