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Filing for bankruptcy may not remove all debts

Kentucky residents considering filing for bankruptcy might like to know that in a Chapter 7 or 13 discharge, not all debts are eliminated. Some of those debts include alimony and child support claims, student loans, criminal fines and some long-term obligations like a home mortgage.

Regarding alimony and child support claims, the effect on these obligations depends on the type of bankruptcy filing. While a Chapter 7 filing will not release the debtor from making child and spousal support payments, a Chapter 13 filing may at least temporarily halt collection efforts on them, depending upon the terms of the repayment plan.

Because the Bankruptcy Code was revised in 2005, domestic support obligations were given precedence and have become excepted from discharge. This means that Chapter 13 debtors are required to certify domestic support obligation payments in full. In addition, debtors who stop paying their domestic support obligations that become due after a Chapter 13 petition is filed could have their case dismissed. Following the end of bankruptcy proceedings, debtors are still held responsible for any post-discharge spousal or child support obligations as well.

While government educational loan debts are not usually discharged in a Chapter 13 bankruptcy, a court may decide to discharge the debt if debtors can prove that the payments would impose an undue hardship on them and their dependents. To be eligible for a hardship discharge, debtors must fill out an application and may have to take a three-part test.

For those struggling with debts, bankruptcy may be a viable solution to achieve a fresh financial start. Because there are certain eligibility and other requirements that must be met, having the assistance of an attorney at the outset could be advisable.

FindLaw, "Debts that Remain After a Chapter 13 Discharge", March 16, 2016

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